VA Minimum Credit Score Guidelines on VA Loans

This guide covers the VA minimum credit score guidelines on VA loans. Many borrowers often get very confused when it comes to the VA minimum credit score guidelines on VA loans. They go to their local bank and are often told that the VA minimum credit score guidelines are 640 FICO. Then they may call Quicken Loans, Veterans United, New Day USA, or other companies that heavily advertise on television and cable networks and are told they need that VA Minimum Credit Score Guidelines are 620 to 640 FICO. Why is there such a discrepancy in the VA minimum credit score guidelines?  The answer is simple. The Department of Veterans Affairs (VA) does not have any VA minimum credit score guidelines. Just because you do not qualify for a VA loan at one lender does not mean that you cannot qualify for a VA loan at a different lender. In the following paragraphs, we will cover the VA minimum credit score guidelines.

Why Lenders Have Different VA Minimum Credit Score Guidelines on VA Loans

The VA minimum credit score guidelines are an agency guideline, and lender overlays are set by individual lenders. All lenders need to meet the VA minimum credit score guidelines on VA loans. However, lenders can have higher lending standards and requirements that are above and beyond the minimum agency mortgage guidelines, which are called lender overlays. Most lenders have lender overlays on VA loans. Unfortunately, many borrowers who meet the minimum agency mortgage guidelines on VA loans get turned down by lenders due to the lender’s lender overlays. Borrowers can qualify for VA home loans with 500 credit scores. This holds true as long as borrowers can get an approve/eligible per automated underwriting system (AUS).  The great news is there are lenders like GCA Forums Mortgage Group that have no lender overlays on VA loans. Over 75% of our borrowers are folks who could not qualify for VA loans at other lenders due to their lender overlays. There is no VA minimum credit score guidelines.  In this blog, we will clarify the VA minimum credit score guidelines and why credit score requirements vary from lender to lender on VA loans.

VA Minimum Credit Score Guidelines Versus Lender Overlays

Over 75% of our borrowers are folks who could not qualify at other lenders due to VA overlays. Lender overlays are mortgage requirements that are imposed by individual lenders that are above and beyond VA minimum credit score guidelines. All lenders will mandate their borrowers to meet VA minimum credit score guidelines. However, lenders can impose higher standards that are above and beyond mortgage guidelines set forth by the U.S. Department of Veterans Affairs. These additional guidelines by lenders are called Lender Overlays. GCA Forums Mortgage Group is a mortgage company licensed in multiple states with no lender overlays on VA loans. We do not have any additional overlays besides the minimum VA Agency Guidelines. As long as borrowers can get an automated underwriting system (AUS) approval, our borrowers are secured in getting approval and closing their VA loans on time.

Choosing A Lender With No VA Minimum Credit Score Guidelines

Most lenders have overlays on VA loans. Under VA minimum credit score guidelines, the Department of Veterans Affairs (the VA) does not have any VA minimum credit score guidelines and/or debt-to-income ratio cap. Then why is it that most lenders have minimum credit score requirements? This is due to that particular lender’s overlays. When a lender is requiring a 620 to 640 credit score, this requirement is not by the VA. The credit score requirements are by the particular lender. GCA Forums Mortgage Group has no overlays on VA loans. As long as borrowers can get an approval/eligible per AUS and borrowers can provide all conditions of the AUS, they can rest assured they will close on their mortgage. GCA Forums has closed countless VA mortgages with credit scores in the 500’s and DTI north of 60% DTI.

VA Minimum Credit Score Guidelines: Automated Underwriting System

VA does not have a minimum credit score requirement or DTI cap on VA loans. However, borrowers will need to get an approve/eligible per automated underwriting system. If borrowers have been timely with all of their payments in the past 12 months and have a descent payment history, they should not have any issues with getting an automated approval. If the automated findings render a refer/eligible, the file can be manually underwritten. Borrowers who need to qualify for VA loans with a mortgage company licensed in multiple states with no lender overlays on government and/or conforming loans can contact us at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

FAQ’s on VA Minimum Credit Score Guidelines

“VA Minimum Credit Score Guidelines Answered” FAQ

Is there VA minimum credit score guidelines to get a VA Loan?

There is no minimum credit score set by the U.S. Department of Veterans Affairs (VA). However, most lenders set their bar between 580 to 620 in order to approve a VA loan.

How tough is it to get a VA loan with a score lower than 580?

It is indeed tough, but not impossible. Certain lenders may endorse lower scores, but only if there are strong compensating factors, such as a low DTI, a considerable downpayment, or sheer savings.

Why does a lender impose a credit score restriction, if the VA does not?

There are no restrictions from the VA minimum credit score guidelines, but lenders set their own, which helps them mitigate risk. A higher score showcases the borrower’s capacity and willingness to take care of their loan.

How would the credit score impact my VA loan interest?

The better the score, the better the interest a borrow would qualify for; a bad score translates to worse rates alongside a plethora of other restrictions. A strong endorsement means reduced interest rates, and, consequently, significant savings on the loan over time.

What are the VA credit score guidelines for the leading VA lenders?

Most VA lenders commonly have the following credit score requirements:

• 580-600: Some lenders may approve with compensating factors.
• 620-660: Most lenders believe this is a secure range.
• Above 700: Borrowers qualify for the most rates and terms.

Am I able to improve my credit score before applying for a VA loan?

Of course! Here are some of the ways you can improve your credit score:

• Pay down debts.
• Make payments punctually.
• Refrain from opening new credit accounts prior to applying.
• Review your credit report for mistakes and correct them.

Are co-signers with higher credit scores permitted on VA loans?

Yes, VA loans do permit co-signers, but only if they are the spouse or another veteran who qualifies. A co-signer with a high credit score stands a better chance of getting the application approved.

In what ways does your debt-to-income (DTI) ratio impact your approval for a VA loan?

While VA loans do not have a specific DTI requirement, most lenders will expect a DTI under 41%. The lower the DTI, along with a good credit score, increases the chances for approval.

VA Minimum Credit Score Guidelines: Are low credit score borrowers required to make a down payment for a VA loan?

No, a down payment is required in most cases, even for borrowers with lower credit scores. However, some lenders may try to put a down payment before an applicant that has poor credit.

Can someone apply for a VA loan after bankruptcy or a foreclosure?

Yes. However, there is a wait timeframe:

• For Chapter 7 bankruptcy: Two years after discharge.
• For Chapter 13 bankruptcy: After 12 months of on-time payments with court approval.
• Foreclosure: Two years from the set foreclosure date.