The VA Loan Program: All About Credit

Posted on Mar 13 2018 - 9:18pm by jc

Beautiful homesThe 0% down payment benefit might be the most popular benefit afforded by the VA loan program. However, as Primary Residential Mortgage, Inc. noted, the laxer credit requirements are one of its most underrated benefits. With conventional loans, lenders require borrowers to have a 720 credit score or higher, aside from the higher down payment requirement. Fortunately, veterans and active military members don’t have to worry about stringent credit requirements.

Basic VA Loans Credit Requirements

With regards to credit, VA lenders are more interested in a borrower’s overall financial picture, and the Veterans Affairs don’t even mandate a minimum credit score to apply for the program. However, the VA isn’t the one that’s going to be offering loans, as it only insures a part of the VA loan for eligible borrowers. It’s the VA lenders — those who actually offer VA loans — who could and do require minimum credit requirements.

In general, you would need to have a credit score of at least 620, which is significantly lower than the credit requirement for conventional loans. This means you don’t need perfect credit to secure a VA loan.

What About Foreclosure, Short Sale, and Bankruptcy?

Aside from laxer credit requirements, VA lenders are more forgiving when it comes to foreclosures and bankruptcy filings. With a conventional mortgage, you need to wait at least four years prior to applying for a conventional home loan if you filed for a Chapter 7 bankruptcy, whereas you would only have to wait for only two years to apply for a VA home loan. If you filed for a Chapter 13 bankruptcy, you’d have to wait for two years after your discharge to apply for a conventional mortgage, whereas you’d only have to wait one year if you’re looking to get a VA loan.

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Following a foreclosure, you’d need to wait for seven long years before you could even apply for a conventional mortgage, while it’s only a two-year wait for qualified VA borrowers. Likewise, borrowers of conventional loans have to wait four years before applying for a mortgage, while qualified VA loan borrowers won’t even have to wait at all. This would still depend on the lender and the borrower’s specific financial circumstances, though.

Military servicemen and veterans could face various financial challenges because of the lifestyle they live while serving the country. Fortunately, VA lenders are not that stringent on credit requirements. If you’re a qualified VA loan borrower, don’t hesitate to discuss your options with a VA-approved lender.