The Department of Veterans Affairs, which guarantees all VA home loans, does not require a certain credit score. But private lenders who issue VA loans may have their own minimum credit rating requirements, which typically range from 580 to 660. The VA itself doesn't set a minimum credit score to qualify for a loan. Ideally, on a VA loan, homebuyers will want to have earned a credit score of 580 or higher, although this varies from lender to lender.
VA loans do not have risk-based price adjustments, which means that the creditor will not price or other credit terms based on the homebuyer's default risk. Homebuyers with a low credit history generally qualify for less favorable credit conditions compared to homebuyers with a strong credit history, this is to help offset the increased risk of default. Low-scoring applicants can get similar rates to high-credit borrowers. If a borrower has sufficient residual income, some lenders will even approve VA loans with credit scores as low as 500.
In other words, the VA wants lenders to look at all of a loan applicant's requirements, not just credit scores (for example, a VA loan isn't the only option available to you, although it can offer you the most credit flexibility). That's because lenders like Freedom Mortgage use your credit score to help determine your eligibility for a VA loan and establish your interest rate. These numbers are suggestions and you may still be eligible for a VA home loan if your credit is below average. However, they will ask you for a higher interest rate on the VA loan if your credit rating is low, since they have a poor record or have no history of handling money.
Beyond credit, FHA loans require a minimum of 3.5 percent down payment, an upfront mortgage insurance premium, and monthly mortgage insurance, which lasts the life of the loan. If you're interested in getting a VA home loan or refinancing a current one, but you're not sure if your credit score is high enough, then you should talk to a lender. A good credit score is a great starting point for anyone considering a mortgage, including a VA loan. You and other military members can still receive a VA home loan with a score that some financial institutions consider below normal standards.
However, if you have a particularly low credit score, you may need to look for one to qualify for a VA loan. If you're considering a VA loan but need help exploring your credit options, get free help from the Veterans United credit counseling team. It may be a good idea to improve your credit score even when it is higher than the minimum your lender requires for a VA loan.
