How To Qualify For VA Home Loans Bad Credit And Low Credit Scores
This BLOG On How To Qualify For VA Home Loans Bad Credit And Low Credit Scores Was Written By Gustan Cho NMLS 873293
Most veteran home buyers looking to get qualified for VA Home Loans Bad Credit and Low Credit Scores do not realize that the U.S. Department of Veteran Affairs (VA Home Loans) do not have a minimum credit score requirement.
- VA also does not have a maximum debt to income ratio caps
- Reason why veteran home buyers often ask what is the minimum credit scores required is because most lenders have their own credit score requirements that is called lender overlays
- Most lenders require 620 to 640 credit scores
- They also have maximum debt to income ratio requirements of 45% to 50%
- Gustan Cho Associates Mortgage Group at Loan Cabin Inc. are direct lenders with no overlays on VA Loans
- Gustan Cho Associates Mortgage Group do not have minimum credit score requirements on VA Home Loans Bad Credit
- Gustan Cho Associates Mortgage Group does not have maximum debt to income ratio caps on VA Home Loans
- As long as veteran borrowers gets an approve/eligible per Automated Underwriting System findings, we just go off the AUS
Mortgage Guidelines on VA Home Loans Bad Credit
VA Home Loans are hands down the best mortgage loan program in the United States.
- However, VA Loans is only for veterans borrowers with a valid Certificate Of Eligibility (COE)
- Our government rewards our veterans of our military with VA Loans in honor for their service to this country
- The U.S. Department Of Veteran Affairs realizes that our veterans may have less than perfect credit due to deployment
- Due to this reason, VA Guidelines are very lax and easier to qualify than other loan programs
- No down payment required
- 100% financing
- There is an upfront VA Funding Fee but that can be rolled into the VA Home Loan Balance
Function And Role Of Department Of Veteran Affairs
One important fact veteran borrowers need to understand is that the U.S. Department of Veteran Affairs does not originate nor fund VA Mortgages.
- The function and role of VA is to guarantee and insure VA Home Loans that has been originated, underwritten, and funded by private VA approved lenders
- VA insures VA Loans if veteran borrowers default on their VA Loans
- VA will insure the lender the portion that the lender lost due to the defaulted VA Loan
- VA mortgage rates are among the lowest out of all loan programs
- Mortgage Rates on VA Loans is based on borrowers credit scores
- The fact that VA does not require annual mortgage insurance saves homeowners thousands of dollars every year
- There are no minimum credit scores required on VA Home Loans
- Credit Score requirements is up to the lender that is willing to originate and fund the VA Loan
- Gustan Cho Associates Mortgage Group does not have any credit score requirements
VA Lenders With Mortgage Overlays
Gustan Cho Associates Mortgage Group at Loan Cabin Inc. are direct lenders with no lender overlays on VA Home Loans.
- We have zero overlays on government and conventional loans
- Over 75% of our borrowers are folks who could not qualify for VA Loans elsewhere due to those lenders having overlays on their VA Loan Programs
What are overlays?
- Overlays are additional mortgage guidelines on VA Loans that is above and behind of those mandated by the U.S. Department of Veteran Affairs
- For example, VA does not require a minimum credit score requirement
- VA does not require debt to income ratio requirements
- As long as our borrowers can get an approve/eligible per Automated Underwriting System Findings, We can guide our veteran borrower to the road to a CTC and close on their VA Home Loan
- However, most lenders will require a 620 credit score
- This is a credit score overlay on VA Loans
- Most lenders will require 43% to 50% debt to income ratios
- VA does not have debt to income ratio caps on VA Loans
- This lender is said to have lender overlays on debt to income ratios on VA Loans
- If one lenders turns down a veteran home buyer does not mean they do not qualify with another lender
Key In Getting Approve/Eligible Per Automated Underwriting System
As mentioned in earlier paragraphs, Department of Veteran Affairs does not require credit scores nor debt to income ratio requirements.
- However, borrowers do need to get an approve/eligible per Automated Underwriting System unless the VA Loan is a manual underwrite
- Veteran Borrowers can get an automated approval on VA Home Loans bad credit
- They do not have to pay off outstanding collections and charged off accounts to qualify for VA Home Loans with bad credit
- However, AUS does frown upon the fact if bad credit does continue after a prior isolated incident of have prior bad credit
Key To Getting An Automated Approval Via AUS
Here are the key points to keep in mind to get an approve/eligible per AUS:
- Credit score of 580 or higher
- No late payments in past 12 months
- Debt to income ratios under 50%
- No late payments after housing event and/or bankruptcy
- Automated Underwriting System will favor a mortgage applicant with a 550 credit score with no late payments than a 640 borrower with multiple late payments
FHA Versus VA Home Loans Bad Credit
VA has much more lenient credit requirements than other loan programs.
- For example, waiting period to qualify for VA Home Loans after housing event (after foreclosure, deed in lieu, short sale) when the waiting period is three years on FHA Loans
- However, FHA is much more lax when it comes to outstanding collections and charged off accounts
- If veteran borrowers cannot get an approve/eligible per AUS Findings to large amounts of collections and charged off account, loan officer can see if they can run AUS for a FHA AUS Approval
- Veteran home buyers can get an FHA Loan and refinance with a VA Loan at a later date
Home buyers who need to qualify for VA Home Loan Bad Credit with direct lender with no mortgage overlays, please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for faster response. We are available 7 days a week, evenings, weekends, and holidays.