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VA LOAN WITH LOW CREDIT SCORES
Can I Qualify For VA Loan With 589 Credit Score?
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1 Reply
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Yes, you can be eligible for a VA loan with a credit score 589, but it will depend on your lender’s specific requirements. While the Department of Veterans Affairs (VA) does not set a minimum credit score for VA loans, most lenders enforce their minimums, usually between 580 and 620. There is no minimum credit score requirement on VA loans.
Things to Think About:
Lender Requirements:
Minimum Credit Score: Many VA lenders need a credit score of at least 580, although some require higher numbers. A lender with a minimum requirement of 580 may accept you if you have a credit score of 589, but you should look around until you find one who can work with your score.
Manual Underwriting: If your scores fall below what is typically required by the lender to approve loans through automated means. Examples include computer systems analyzing credit reports electronically, and manually underwritten mortgages might still work out after considering other factors like steady income over time or paying rent punctually.
Compensating Factors:
Low Debt-to-Income (DTI) Ratio: The lower this ratio is, the stronger it can be as a compensating factor. Suppose yours falls within an acceptable range (usually below 41%). In that case, lenders might become more lenient towards your application despite your less-than-ideal credit scores.
Strong Employment History: A stable job coupled with steady earnings could offset any negative impact by having poor or average-quality consumer reporting agency files on record.
Significant Savings: This could greatly improve chances for mortgage approval, especially where savings or assets equal several months ‘ worth of housing payments exist in account balances before the closing date.
Interest Rates and Loan Terms:
Higher Interest Rate: Given their low credit rating, such individuals may face slightly higher interest rates when borrowing money from financial institutions than those whose risk profiles are perceived favorably.
VA Funding Fee: The VA imposes this fee on every loan it guarantees unless an exemption applies (e.g., if the borrower receives disability benefits). The amount charged remains constant regardless of credit score.
Improving Your Credit Score:
It might be worth improving your credit rating if you can wait a while before applying for a mortgage. Doing so could increase your chances of getting approved by more lenders who offer better terms and rates if they consider you less risky.
Final Thoughts:
Even though someone’s FICO score stands at 589, it doesn’t mean they automatically qualify for a VA loan with such a number. There needs to exist willingness on the part of potential lenders as well as compensatory factors demonstrating financial responsibility above average levels. For instance, someone whose score falls just short of another tier should work towards attaining higher points because this affects not only what will be available in terms but also interest rates.
If you need help finding loans or improving credit, please ask me!