This ARTICLE On VA Credit Score Mortgage Guidelines On VA Home Loans Was PUBLISHED On November 18th, 2019
VA mortgages are the best home loan program in the Nation. The U.S. government created and implement VA loans with approval by the U.S. Congress to reward our veterans. Only veterans of our military with Certificate of Eligibility (COE) are eligible for VA loans:
- There is no down payment requirements on VA loans
- Borrowers can purchase a home with 100% financing and no closing costs with VA home loans
- Closing costs can be covered with sellers concessions by the home seller and/or lender credit
- Lender credits are offered by mortgage companies to cover part and/or most of the closing costs in lieu of a higher mortgage rate
- VA loans have lenient mortgage agency guidelines
- More so than any other government and/or conforming loan programs
- Per VA Credit Score Mortgage Guidelines, there are no minimum credit score requirements on VA loans
- There is no maximum debt to income ratio on VA loans either
- However, most lenders will have minimum credit score requirements as part of their lender overlays
- Not all lenders have the same guidelines on VA loans
- Just because one lender says no does not mean a different lender will do the same
- Gustan Cho Associates are one of the very few national lenders with no lender overlays on VA loans
In this article, we will cover and discuss VA Credit Score Mortgage Guidelines On VA Home Loans.
What Are Lender Overlays?
There are two types of VA Lending Guidelines:
- VA Agency Guidelines
- Lender Overlays By Mortgage Companies
All lenders need to abide by the VA Agency Guidelines.
- However, lenders can have their own additional guidelines called lender overlays
- This is the reason why a borrower who meets all VA guidelines may not qualify with one lender but may qualify with a lender with no overlays
Gustan Cho Associates Mortgage Group is one of the very few national lenders with no lender overlays on VA loans.
VA Credit Score Mortgage Guidelines Versus Lender Overlays
As mentioned earlier, all lenders need to meet the minimum VA Agency Guidelines on VA mortgages.
- However, lenders are allowed to have overlays on VA loans
- Lenders can have overlays on just about anything and everything
- Per VA Credit Score Mortgage Guidelines, VA does not have a minimum credit score requirement as long as borrowers can get an approve/eligible per automated underwriting system
- However, most lenders require a minimum credit score of 620 FICO
- A lot of lenders may even have a 640 credit score requirement when the VA has no set minimum
Over 75% of our borrowers at Gustan Cho Associates are folks who have been turned down for a VA loan due to lender overlays. Gustan Cho Associates Mortgage Group has no lender overlays on VA home loans. We just go by the automated underwriting system findings.
The Automated Underwriting System
The Automated Underwriting System is also referred to as the AUS. The way the AUS works is as follows:
- Loan officer inputs borrowers mortgage application and credit report
- Within seconds, the AUS will render an approval and/or refer/eligible findings
- With an approve/eligible, the borrower is set to go with lenders with no overlays such as Gustan Cho Associates Mortgage Group
- If the findings render a refer/eligible per AUS findings, the borrower may be eligible for manual underwriting
Manual underwriting guidelines apply. VA and FHA Loans are the only two loan programs that allow manual underwriting.
Credit Scores Versus Credit Payment History
Timely payments in the past 12 months are key to obtaining a VA loan approval. Borrowers with a high credit score but late payments in the past 12 months may not get an automated underwriting system approval. However, a lower credit score borrower with timely payments in the past 12 months may get an approve/eligible per AUS. Lenders understand borrowers having a tough time where their credit suffered. However, lenders want to see that the borrower have re-established their credit and has been timely for the past 12 months. On manual underwriting, timely payments in the past 24 months are required. One or two late payments in the past 12 to 24 months is not always a deal killer with a good letter of explanation. VA lending guidelines are the most lenient out of all loan programs. The VA realizes that active-duty and/or retired members of our Armed Services may have less than perfect credit than their civilian counterparts due to being in the military and/or deployed.