This Article Is About The VA Minimum Credit Score Guidelines On VA Home Loans
Many borrowers often get very confused when it comes to the Minimum Credit Score Requirements on VA loans. They go to their local bank are often told that the VA Minimum Credit Score Requirement is 640 FICO. Then they may call Quicken Loans, Veterans United, New Day USA, or other companies that heavily advertise on television and cable networks and are told they need that VA Minimum Credit Score Guidelines are 620 to 640 FICO. Why is there such a discrepancy in the Minimum Credit Score Requirements? The answer is simple. The Department of Veterans Affairs (The VA), does not have any VA Minimum Credit Score Requirements. Just because you do not qualify for a VA loan at one lender does not mean that you cannot qualify for a VA loan at a different lender.
Why Lenders Have Different Credit Score Requirements On VA Loans
The minimum credit score requirements are set by individual lenders. All lenders need to meet the minimum agency mortgage guidelines on VA loans. However, lenders can have higher lending standards and requirements that are above and beyond the minimum agency mortgage guidelines which are called lender overlays. Most lenders have lender overlays on VA loans. Unfortunately, many borrowers who meet the minimum agency mortgage guidelines on VA loans get turned down by lenders due to the lender’s lender overlays. Borrowers can qualify for VA Home Loans with 500 credit scores. This holds true as long as borrowers can get an approve/eligible per automated underwriting system (AUS). The great news is there are lenders like Gustan Cho Associates that has no lender overlays on VA loans. Over 75% of our borrowers are folks who could not qualify for VA loans at other lenders due to their lender overlays. In this blog, we will clarify why credit score requirements vary from lender to lender on VA loans.
VA Agency Mortgage Guidelines Versus Lender Overlays
Over 75% of our borrowers are folks who could not qualify at other lenders due to VA Overlays. Lender overlays are mortgage requirements that are imposed by individual lenders that are above and beyond VA Agency Guidelines. All lenders will mandate their borrowers to meet VA Agency Guidelines. However, lenders can impose higher standards that are above and beyond mortgage guidelines set forth by the U.S. Department of Veterans Affairs. These additional guidelines by lenders are called Lender Overlays. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on VA Loans. We do not have any additional overlays besides the minimum VA Agency Guidelines. As long as borrowers can get an automated underwriting system (AUS) approval, our borrowers are secured in getting approval and closing their VA Loans on time.
Choosing A Lender With No VA Minimum Credit Score Requirements
Most lenders have overlays on VA Loans. Under VA Mortgage Lending Guidelines, the Department of Veterans Affairs (The VA) does not have any minimum credit score requirements and/or debt to income ratio cap. Then why is it that most lenders have minimum credit score requirements? This is due to that particular lender’s overlays. When a lender is requiring a 620 to 640 credit score, this requirement is not by the VA. The credit score requirements are by the particular lender. Gustan Cho Associates has no overlays on VA Loans. As long as borrowers can get an approve/eligible per AUS and borrowers can provide all conditions of the AUS, they can rest assured they will close on their mortgage. Gustan Cho Associates has closed countless VA Mortgages with credit scores in the 500’s and DTI north of 60% DTI.
Automated Underwriting System
VA does not have a minimum credit score requirement or DTI cap on VA Loans. However, borrowers will need to get an approve/eligible per automated underwriting system. If borrowers have been timely with all of their payments in the past 12 months and descent payment history, they should not have any issues with getting an automated approval. If the automated findings render a refer/eligible, the file can be manually underwritten. Borrowers who need to qualify for VA Loans with a mortgage company licensed in multiple states with no lender overlays on government and/or conforming loans can contact us at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.
March 30, 2021 - 3 min read