Is It Possible to Use a VA Loan with Low Credit?

“I have a low credit score, can I utilize VA loan?”

Short answer is most likely yes.

So, the VA doesn’t actually fund VA loans; a lot of folks assume that the VA funds loans.

They really essentially just ensure loans to lenders.

So, like, we’ll make a loan and the VA will guarantee it as long as it meets certain requirements.

Now, here’s the deal: the VA, for guaranteeing those loans, doesn’t have a credit score rating, meaning that they don’t really require a lender to have a borrower who has a certain credit score.

That really means theoretically you could get a VA loan with a 500, 520 credit score, no problem.

The deal is a lot of lenders start adding what’s it called overlays, so restrictions on top of those VA requirements.

And like for us, we’re willing to go very low on that credit score. Most folks you might hear 620, 640, some even up to 700 credit scores and above to utilize a VA loan.

In our world, we typically work with 580 and above on credit scores.

However, we know of some lenders out there that will work with 500 and above credit scores.

And if you’re really interested in that, please reach out. More than happy to help you and get you connected with lenders who are willing to do that.

If you have a lower score, for us, 580 plus is generally where we see success. So, we work 580 and above. But just know that it really comes down to the lender that you’re working with.

And why is that?

Because remember, the VA doesn’t actually fund loans; they just insure them.

And the lender is the one that is supposed to make the risk adjustment and requires all the documentation to make sure, hey, everything is in good shape, meeting those baseline requirements of the VA.

And as long as the baseline requirements are met, the VA says, “Hey, we’ll guarantee that loan up to typically 25% of the loan value if there are any losses.”

So, credit score to the VA really doesn’t matter too much. It matters to your individual lender that you’re working with.

Now, one thing that really does matter is what’s on that credit report.

So, if you got a lot of dings and bad history, VA loan can be very forgiving. If you have issues like delinquencies and past due notices and stuff, it can be very forgiving on that.

But there are certain limitations where if you have past bankruptcies, for example, or if you have so many derogatories on your credit report, that can impact your ability to get a VA loan.

So just keep that in note. But that starts to get to be very subjective because it depends on what comes across on your score.

But know that for the rating itself, it depends heavily on the lender.

So, you want to make sure that you’re talking with someone and right up front, if you know your score is lower, to tell them, “Hey, my score I think is X.” They can run the credit for you – like if it was me, we can check it for you to see where it’s really at.

We can even try to help get you into some repair-related programs to see if there’s any way we can help improve that credit score. But just know that it’s very lender dependent.

So, if you’ve been denied on a VA loan, for example, your credit score is 600 and you’ve been denied for a VA loan, that’s a common one when folks will come to us. Generally, 620 and below seems to be where a lot of lenders cut off, 620, 640. But know that that’s lender-dependent and you can go out to still see if you can get a VA loan.

Now, here’s the deal with a lower credit score: should you still be getting a loan?

Because why do you have that lower credit score in the first place? If you have a lot of issues which is carrying debt loads and making sure that you make your payments overall, take a step back and ask yourself, should I be taking on the financial risk of owning a home and having another large payment if I can’t keep together my credit card bills and a car payment?

How then can you keep together a house payment?

Not necessarily a wrong answer is here – but the deal is, just know that you need to then work on your overall financial picture.

That’s why I always tell folks it’s important to try to get your whole financial house in order, do some basic budgeting to make sure, hey, am I taking care of everything and am I ready and feel comfortable and responsible enough to take on this new mortgage?

Now, some folks we work with have lower credit scores, but they’ve turned that ship.

They’ve made the turn already to improve their financial future and now they just still have the lower score because sometimes it takes time to build that back up and they’re ready to go buy that home.

Some folks that we’ve had in the past, yeah, they missed a few dings, they were on deployments, but now they got it together, they’re on a budget and now all of a sudden they know, hey, I can take on the responsibility of buying that house.

In those scenarios, okay, lower credit score, wonderful, but if you feel you don’t have your full budget put together, make sure you take a step back, put your budget in order.

And if you still feel comfortable that you can make a housing payment work, then reach out to a lender who might be able to work with that score.

You can start with us, more than happy to see if we can work for you. And if it happens to be a really low score, again that 500 range, we can help direct you to lenders who might be able to help work for you at those scores.

My name is Evan Kaufman, your VA loan originator. Hopefully this helps you go out there and win a home with the VA loan. Take care.