VA Guidelines Under 580 Credit Scores On VA Loans

This Article Is About VA Guidelines Under 580 Credit Scores On VA Loans:

VA loans do not have minimum credit score requirements. Mortgage companies need to follow the minimum VA agency mortgage guidelines. However, individual mortgage companies can have higher lending requirements higher than the minimum VA agency mortgage guidelines. The higher lender requirements imposed by individual lenders are called lender overlays. Many borrowers are told a certain minimum credit score by mortgage lenders. The minimum credit score requirements are set by the individual mortgage lender and not the VA. If you do not qualify with a lender on a VA loan but meet the minimum VA agency guidelines, you will qualify for a VA loan with a different lender with no lender overlays. As long as the borrower can get an approve/eligible per the automated underwriting system, the borrower is eligible for a VA loan. Gustan Cho Associates has no lender overlays on VA loans. Over 75% of our borrowers are folks who could not qualify at other lenders due to the lender overlays or because they got denied at the last-minute. 

VA Loans With 500 Credit Scores

VA loans do not have a maximum debt to income ratio. It is possible to get an approve/eligible per automated underwriting system with a 500 FICO and a 65 DTI as long as the borrower has an approve/eligible per AUS. Gustan Cho Associates has an aggressive investor on VA loans that will approve manual underwriting with lower credit scores and higher debt to income ratios as long as the borrower has strong residual income and compensating factors. We have approved manual underwriting VA loans with under 600 credit scores and over 60% debt to income ratios.

In this article we will cover the following points:

  • VA loans with under 580 credit scores
  • Qualifying for VA loans with manual underwriting with lower credit scores and higher debt to income ratio
  • Getting approved on manual underwriting with late payments in the past 24 months

VA loans with bad credit and lower credit scores are more forgiving than FHA loans. We will explain why in this article.

Prequalify for a VA home loan now. 

Can The Borrower Qualify For A VA Loan With A Low Credit Score?

What are VA Guidelines Under 580 Credit Scores On VA Loans? The simple answer is the Department of Veterans Affairs has no minimum credit score requirements. Then why are lenders asking for a 620 to 640 credit score minimum?

The main reason why lenders ask for a minimum credit score requirement is not that the Department of Veterans Affairs requires it but because they can have higher lending requirements called overlays Lender overlays are additional lending guidelines imposed by individual lenders that are above and beyond minimum VA Guidelines.

Agency Guidelines Versus Lender Overlays On VA Loans

All lenders require their borrowers to meet minimum VA Guidelines. However, lenders can have their own lending requirements called mortgage overlays. This is the reason why a borrower may not qualify for VA Loans with a particular lender but may qualify with another lender. Therefore, not all lenders have the same VA lending requirements. Gustan Cho Associates are lenders with no overlays on VA Loans. Gustan Cho Associates just follow VA Guidelines Under 580 Credit Scores which is no minimum credit scores are required. VA Guidelines Under 580 Credit Scores allow borrowers to qualify for VA Loans with under 580 scores. However, borrowers will need to get an approve/eligible per automated underwriting system.

Automated Underwriting System On VA Loans

What is an automated risk assessment system

The automated underwriting system is an intricate sophisticated computer system that all mortgage borrowers need to go through. Loan officers will first collect mortgage documents. Docs include 1003 loan applications and credit reports. Once the loan officer submits all credit, asset, debts, and income information to the automated underwriting system, the AUS system will render an automated decision.

There are three readings the automated underwriting system will render:

  • Approve/Eligible
  • Refer/Eligible
  • Refer/With Caution

Approve/Eligible is what borrowers want. Approve/Eligible means that the borrower has an automated underwriting system approval and fully meets all VA Guidelines. Gustan Cho Associates Mortgage Group only goes by the approve/eligible per AUS. We do not have any additional guidelines on VA Loans. So we have zero overlays on VA Home Loans. Refer/Eligible means that borrowers may qualify but the AUS cannot render an automated approval. However, borrowers may qualify for VA Loans via manual underwriting. Refer/With Caution means that the borrower does not meet VA Guidelines. Under VA Guidelines Under 580 Credit Scores, borrowers can qualify for VA Loans with 500 credit scores as long as they can get an AUS Approval. Borrowers who cannot get an approve/eligible per AUS and can get a refer/eligible per automated underwriting system can be manually underwritten. VA manual underwriting guidelines apply.

VA Guidelines Under 580 Credit Scores And Key In Getting AUS Approval

Gustan Cho Associates has qualified, approved, and closed countless borrowers with under 580 credit scores. The key to getting an approve/eligible per automated underwriting system on VA Loans with under 580 credit scores is to make sure borrowers have been timely on all of their payments for the past 12 months. Borrowers can have bad credit, prior collections and charged-off accounts, and late payments. However, the key is to have been timely on all of their payments in the past 12 months.  

Finding Lender That Honors VA Guidelines Under 580 Credit Scores With No Overlays

VA Guidelines Under 580 Credit Scores With No Overlays

Not too many lenders will approve borrowers with under 580 credit scores. Gustan Cho Associates is one of the very few national lenders that can approve borrowers with under 580 FICO. To start the qualification process with credit scores under 580 FICO, please contact us at Gustan Cho Associates at 262-716-8151 or email us at [email protected] Text us for a faster response. Gustan Cho Associates has a national reputation for being able to do loans other lenders cannot do. We are mortgage bankers, correspondent lenders, and mortgage brokers. We have in-house mortgage underwriters and support/operations staff for government and conventional loans. We have a hybrid business model where we are mortgage bankers and have the ability to broker non-QM and alternative specialty mortgage loan programs such as no-doc home loans, 12-month bank statement mortgages for self-employed borrowers with no income tax returns required, P and L stated income mortgages, asset-depletion loans, non-QM mortgages one day out of bankruptcy and foreclosure. The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.

Get a custom VA mortgage quote now. 

Leave a comment