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VA loan credit score requirements aren’t too complicated. In most cases, the minimum credit score for a VA loan is 580-620. The main benefit of seeking a VA home loan is that you should be able to qualify even if you don't have a high credit score.
This guide takes a closer look at the credit score requirements that buyers must meet if they want to qualify for a VA home loan.
If you are a current member of the U.S. military or a veteran, you may be eligible for a VA home loan, which is backed directly by the Department of Veterans Affairs.
Government-backed loans are available to qualifying buyers who may have found it difficult to qualify for a conventional loan that's backed by a mortgage association like Freddie Mac or Fannie Mae.
In this post:
VA Loan Ultimate Guide
I built the VA Loan Ultimate Guide to explain the confusing VA loan process.
- What is a VA loan?
- How to determine if you are eligible for a VA loan?
- How to get a VA loan Certificate of Eligibility?
- What credit score do you need for a VA loan?
- What is the VA loan process, from start to finish?
- Who are the best VA loan lenders?
- What is a VA cash-out refinance loan?
Here's a podcast episode from my Military Money Manual Podcast all about using the VA loan:
What Your VA Loan Credit Score Should Be
Likely the most important aspect of qualifying for a VA home loan is to make sure that you have the minimum VA home loan credit score. Each lender sets its own guidelines for what your credit score should be.
Many lenders have minimum credit score requirements of 580. If your credit score is between 580-620, you'll likely be able to qualify for a VA loan. However, your interest rate will most likely be higher than someone with a 750 credit score.
In the event that your credit score is lower than 620 but higher than 580, the lender you apply with may require a debt-to-income ratio of 45% or lower.
When your credit score is higher than 620, the DTI requirements become less stringent. A credit score of 750 or above may allow you to qualify for a VA loan even if you have a DTI of around 60%.
If your credit score is currently lower than the minimum range of 580-620, you should consider taking steps to improve your credit score before attempting to apply for a VA home loan.
By making payments on time and paying down debt, you should notice your credit score increasing relatively quickly. Some of the other eligibility requirements that VA loans have include:
- You must move into the property you purchase within 60 days after the closing date
- While manufactured homes and condos may be covered by a VA loan, not all lenders finance VA loans for these types of properties
- Debt-to-income ratio must be at 60% or lower with a preference of 45% or lower
- Even though a down payment isn't required, some lenders will require borrowers to have a higher credit score if they aren't making a down payment
- A VA funding fee that amounts to 2.3-3.6% of the total loan amount must be paid
Keep in mind that the VA funding fee mentioned above doesn't need to be paid up front but can be rolled into your monthly mortgage payments.
VA Loan Process
Before you apply for a VA home loan, keep in mind that the Department of Veterans Affairs doesn't issue these loans to borrowers. Instead, the loans will be backed by Veterans Affairs and issued by private lenders like mortgage companies and banks.
These loans are considered to be non-conforming loans as a result of the less stringent requirements. Along with a lower credit score, you may be able to obtain VA home loan eligibility even if you don't provide a sizable down payment or have a somewhat high debt-to-income ratio. When you want to apply for a VA home loan, you can do so in six simple steps.
Step 1: Obtain a Certificate of Eligibility
The first step of this process involves obtaining a VA home loan certificate of eligibility. This certificate is necessary if you want lenders to know that you're eligible for a VA home loan. You must display some proof of your current or past military service. Most lenders will assist you with obtaining the VA certificate of eligibility as long as you provide the right documents.
Step 2: Seek Preapproval
Before you go searching for a home to buy, it's highly recommended that you obtain preapproval with your preferred lender. By doing so, you'll be able to identify how much you can reasonably afford when buying a home.
Keep in mind that many sellers find preapproval letters to be necessary as a way to show that you are serious about the offer you've made. People who don't have preapproval letters are oftentimes just “window shopping” and won't actually make a serious offer when it comes time to do so.
Step 3: Search for the Right Home
If you believe that you qualify for a VA home loan, you'll next be tasked with actually finding the home that you'd like to buy, which can take anywhere from a couple days to several months. Searching for a home with a VA loan is just like doing so with all other loan types.
However, the property that you're interested in purchasing will need to meet the minimum property requirements that the VA maintains. These requirements essentially mean that the home needs to be structurally sound, sanitary, and safe. However, the requirements can vary depending on the area that you're purchasing a home in.
Step 4: Make an Offer
The fourth and most important step in this process involves making an offer on the home that you like. The current market conditions will dictate whether or not your offer is accepted. When there's a lot of competition among potential buyers, sellers may receive multiple offers, which could drive the price up.
The seller could accept your offer, make a counteroffer, or reject your offer. Once you have made an agreement with the seller on a price, a sales contract will be drawn up, which both parties must sign.
Step 5: Complete Underwriting and Appraisal Processes
The fifth step in this process involves completing the underwriting and appraisal processes. Underwriters are professionals who work for your lender and are responsible for making sure that your finances are in order and that you meet the qualifications for a VA home loan. Keep in mind that the VA will also task you with obtaining an appraisal before the loan is officially approved.
The appraisal process for a VA loan can be somewhat stricter when compared to the conventional loan process. The professional appraiser will make sure that the home you're in the process of buying meets the minimum property requirements mentioned previously without the need for substantial repairs.
Step 6: Attend Closing Day
All that's left is for you to attend closing day, which involves signing documents, obtaining your loan, and being handed the keys to the home you've just bought.
VA Home Loan Eligibility Requirements
VA home loans have proven to be highly appealing because of the low credit score requirements as well as the lack of a down payment. If you meet the minimum requirements for a VA home loan, you don't need to put down 5-20% of the home value to qualify for the loan.
Keep in mind, however, that any money you do put down will reduce the loan amount and give the lender more confidence that you'll be able to repay the loan. As such, the interest rate you receive will be lower when you provide a down payment.
Even though each lender has its own requirements on which borrowers will be able to qualify, there are some general requirements that every borrower must meet. Not every individual who has spent time in the U.S. military will qualify for this type of loan. The military criteria you will need to meet if you want to qualify for a VA loan include:
- You have been in active service throughout wartime for at least 90 consecutive days
- You have been in active service for at least 181 days of peacetime
- You have six years or more of service through the National Guard and Military Reserves
Only one of these qualifications must be met if you want to qualify for a VA home loan.
Make Sure You Have the Right Documentation
You will need to provide your lender with the right documentation that proves you are eligible for a VA home loan. These documents can be practically anything that shows your status with the U.S. military.
If you are an existing service member, veteran, or surviving spouse, you should be able to qualify for this type of loan. Once the right documents are submitted, you'll be able to obtain a Certificate of Eligibility. The exact documents you require depend on your status with the military.
- Active-duty service members – You must provide a statement of service that's signed by a unit commander or personnel officer. This statement will need to include your Social Security number, date of birth, and full name. The information that a statement of service should include extends to the date you entered service, the full name of the officer providing this info, and any discharges or breaks you may have taken.
- Veterans – Make sure to fill out DD Form 214 that directly verifies your past military discharge.
- Current National Guard member – You will need to submit a statement of service, which has the exact same requirements as it does for an active-duty service member.
- Surviving spouse – If you don't receive dependency benefits, you should provide your lender with your marriage license, your spouse's death certificate, and your spouse's DD Form 214. Form 21P-534-ARE must also be completed, which can be found on the VA benefits website.
Benefits of Seeking a VA Home Loan
There are many benefits that you can take advantage of by seeking a VA home loan. If you qualify for this type of loan, you'll benefit from:
- Relatively low interest rates
- Mortgage insurance isn't required
- A down payment isn't required
- Credit score requirements are significantly lower in comparison to conventional loans
- You can access 100% of equity when you obtain a VA cash-out refinance, which isn't possible with other loan types
Private mortgage insurance is required for conventional loan borrowers who don't provide a down payment of 20% or more. Not having to pay for this insurance can save you around 0.5-1.0% of the total loan amount every year.
VA home loans are highly popular loans that are available to current and past members of the U.S. military. Even though these loans don't come with a specific minimum credit score that every borrower must adhere to, each lender will have their own credit score minimums that you will need to take into account.
In most cases, the minimum credit score for a VA home loan is 580-620. If your credit score is at or higher than this minimum range, you should be able to qualify for a VA home loan as long as you meet the other eligibility requirements.
For the majority of U.S. counties, the home loan limits for 2022 are situated at $647,200. However, VA loan limits are considerably higher for homes that are located in high-cost counties. These limits are set at $970,800 when purchasing a single-family home.
The credit requirements for a VA cash-out refinance loan are the same as they are for a standard VA home loan, which means that most lenders will require a minimum credit score of 580-620 before providing borrowers with a loan.
As mentioned previously, the Department of Veterans Affairs maintains a set of minimum property requirements that will need to be met to ensure that the home is safe for the borrower to live in. These requirements focus on making sure that the property is safe, sanitary, and structurally sound. For instance, the property must be free of any lead-based paint and sufficient in overall size for standard living necessities.
If you want to apply for a VA home loan but find that your credit score still isn't high enough, there are several steps you can take to increase your credit score by a considerable amount. First, it's highly recommended that you review your primary credit reports to make sure that there aren't any errors that are causing your credit score to drop. Any inaccuracies on a credit report can be easily corrected.
You should also focus on paying down any revolving debt you have as much as possible. Paying your credit card balance each month will increase your credit score as well. If you've been using up a large percentage of your credit each month, try to reduce credit utilization to 30% of your limit every month, which should improve your credit score.