This article outlines VA loan requirements for credit score, bankruptcy, short sale, judgment, and foreclosure.
What is the credit score for a VA loan?
The Department of Veterans Affairs (VA) does not have a minimum credit score requirement for VA loans. But, mortgage lenders offering VA loans set minimum credit scores to determine your ability to repay the loan.
Most VA lenders require a minimum credit score of at least 620. But the exact requirement may be higher or lower, depending on the lender.
NewCastle Home Loans offers VA loans to military personnel and veterans, and our minimum credit score is 580.
You can get approved for an affordable VA loan when your credit score is 580 or higher.
This means you can use your VA benefits to buy a home with no down payment when your credit is less than perfect. Then, enjoy a low rate and monthly payment with no mortgage insurance. Check out our VA loan calculator to view current VA loan rates, payments, and costs.
Which credit score do lenders use for VA loans?
Mortgage lenders offering VA loans check all three credit bureaus, Equifax, Experian, and TransUnion, as part of the home loan process. The credit bureaus maintain records of your credit history, including information about credit accounts, loans, and payment history.
Lenders use this information to determine your ability to repay the loan. By reviewing your credit report from all three credit bureaus, lenders get a complete picture of your credit history and financial stability.
The credit bureaus give you a credit score. Your credit score predicts how likely you are to repay the loan. Based on your credit history. The scores range from 300 to 850. The higher your score, the better.
Lenders use the middle credit score to qualify you for a VA loan. The qualifying score is the lower middle score for the borrower and any co-borrowers for the loan.
If you apply by yourself and your credit scores are 600, 610, and 620, your qualifying credit score is the middle score of 610.
Then, let's say you add your spouse to the loan application, her scores are 700, 710, and 720, and her qualifying score is 710.
In this case, the lower-of-the-middle credit score is 610, so the lender would use 610 to qualify you for the mortgage.
Remember that even if you meet the minimum credit score requirement for a VA loan, you may still need to demonstrate a solid credit history and financial stability to qualify for the loan. Talk to a VA loan expert at NewCastle Home Loans. Ask questions, get straight answers, and find out how to start on your VA home loan.
How long before my credit score expires?
Your credit report and score are good for 120 days. After that, it expires, and the lender generates a new one. The lender uses the new report and score to make a loan decision and calculate the interest rate. So a lower score could affect your loan.
Maintain a good credit score and avoid making significant changes until you buy a house. Continue paying your bills on time and wait to make big purchases on credit.
Don't take out a loan to buy a car or open a credit card to purchase furniture for the new place. Lenders monitor your credit during the mortgage process. They know when you open new accounts, and they count the new debt when underwriting your loan application.
Bankruptcy - How long is the waiting period for a VA loan?
The waiting period for a VA loan after bankruptcy varies depending on the type of bankruptcy, the circumstances leading up to it, and the lender. NewCastle Home Loans' waiting period for a VA loan after bankruptcy is as follows:
Chapter 7 bankruptcy: Two years from the date of discharge
Chapter 13 bankruptcy: One year from the date of discharge
Additionally, even if you meet the waiting period requirement, you may still need to demonstrate a solid credit history and financial stability to qualify for a VA loan. We may ask you for a letter of explanation and documentation of your bankruptcy, such as court records or bankruptcy discharge papers.
Short sale - How long is the waiting period for a VA loan?
The waiting period for a VA loan after a short sale varies depending on the circumstances leading up to the short sale and your credit history.
If you use NewCastle Home Loans for your VA loan, you might not have a waiting period after a short sale - as long as you prove both of the following are true:
The short sale didn't affect your payment history on the property, and
The short sale resulted from a documented extenuating circumstance, such as a natural disaster or job loss.
Supporting documents like a letter of explanation and a Closing Disclosure from the short sale would prove the circumstances.
Judgment - How long is the waiting period for a VA loan?
You can get a VA loan if you have a judgment on your credit report, but it may be more difficult. A judgment is a court ruling that results from a creditor suing a borrower and winning a lawsuit for an unpaid debt.
Judgments must be paid in full or need a repayment plan with at least 12 timely payments.
Foreclosure - How long is the waiting period for a VA loan?
You can get a VA loan if you previously lost a home to foreclosure after a two-year waiting period with no additional requirements. However, you may be eligible after one year if both of the following are true:
You re-established good credit by opening at least two accounts, like cars or credit cards, and made payments on time for at least 12 months.
You can prove that the foreclosure was caused by circumstances beyond your control, such as unemployment, prolonged strikes, and medical bills not covered by insurance.
The lender will be able to review your credit history and financial situation and help you understand whether you may be able to qualify for a VA loan after a foreclosure.
Does a short sale or foreclosure affect a VA loan?
A previous short sale or foreclosure can impact your VA entitlement for a new VA loan. VA entitlement is the amount of money the VA is willing to guarantee on a VA loan.
Suppose you previously lost a home to a short sale or foreclosure and the loan on the house was a VA-guaranteed loan. In that case, you may not have full entitlement available. Check your VA Certificate of Eligibility to ensure you have sufficient entitlement for a VA loan.
Or talk to an expert at NewCastle Home Loans to understand your options. We'll check your COE to determine if you're eligible for a VA loan, so you know what to expect when buying a home.
The requirements for credit score, bankruptcy, short sale, judgment, and foreclosure may differ for each VA-approved lender.
Shop around and compare the credit score requirements of different lenders before applying for a VA loan, as this can help you find the lender offering the lowest rate and willing to work with your credit score.
Although you can buy a home with a 580 credit score, you'll need a higher credit score VA-backed cash-out refinance loan. For example, you need a 620 or higher score to refinance with NewCastle Home Loans and a 680 or higher score to borrow more than 90% and up to 100% of your home's appraised value.
Visit our VA loan page for more information. Feel free to comment below.