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The U.S. Department of Veterans Affairs (VA) reported that in 2022, nearly 750,000 VA home loans were issued, and the average loan amount was $343,895. For veterans and service members (and their families), a VA loan remains one of the most viable paths to homeownership.
Those interested in the program typically have questions about the minimum credit score requirements. We’ll explain why even though there’s no mandated minimum credit score, there are still thresholds that will impact one’s ability to qualify for a loan.
Why Minimum Credit Scores for VA Loans Vary
The VA doesn’t mandate a minimum credit score for applicants. However, their policy requires that mortgage lenders review an applicant’s entire loan profile. In effect, this allows lenders to set their own credit score limits, so long as they still review everything. For example, Rocket Mortgage requires that applicants for VA loans have at least a 580 FICO® Score.
You’re not alone if you’re confused about why lenders have different minimums. Technically, the VA guarantees mortgage loans through the VA loan program, but it doesn’t issue them. Lenders still need to decide for themselves if they’re going to issue the loan or not.
Mortgage lenders make that decision based on an applicant’s risk profile – in other words, how likely they think the person is to repay the loan. Credit history is a big part of that calculation.
By guaranteeing a portion of the loan, the VA reduces some of the lender’s risk, allowing them to accept applications with lower credit scores than they would for conventional loans.
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Can you get a VA loan with bad credit?
If your credit score is under 580, you’d probably be better off looking for ways to improve your credit score versus trying to find a lender willing to approve your loan.
The lower your credit score is, the higher the interest rates you’ll end up paying. This could cost you thousands of dollars over the life of the loan. You also run a higher risk of falling victim to mortgage scams.
VA Loan Credit Requirements vs. Other Mortgage Loans
This table shows how VA credit requirements stack up against other types of mortgage loans. For simplicity, we’ve used the 580 score from Rocket Mortgage.
|Minimum Credit Score||Loan Type|
|580 (Rocket Mortgage)||VA loan|
|620 (for most lenders)||Conventional loan|
|500 (must meet down payment requirements)||Federal Housing Administration (FHA) loan|
|640 (for most lenders)||U.S. Department of Agriculture (USDA) loan|
One of the biggest perks of the VA loan is that there’s no down payment requirement.
Other VA Loan Eligibility Requirements
Even if you meet the credit score requirement for a VA loan, there are some other requirements you should be mindful of.
- Residence type: VA loans can’t be used for investment properties or vacation homes. You must plan on using the home as your primary residence.
- Debt-to-income (DTI) ratio: Similar to credit score, there are no official DTI ratio limits set by the VA. However, many lenders will set their own limits as part of their risk analysis.
- VA funding fee: This is a one-time payment the loan applicant must make on a VA loan. The purpose is to lower the cost of the loan for U.S. taxpayers. It usually ranges between 1.5% and 3.3% of the loan’s value.
VA Loan Next Steps
If you think you meet the requirements and are interested in applying for a VA loan, here are some suggested next steps.
- Secure your certificate of eligibility (COE): This document will prove to lenders that you’re eligible for a VA loan. You can either apply for this document online or fill out VA Form 26-1880 and submit it to a local VA processing center. Your lender can also help verify your COE if you’re having trouble finding it.
- Apply for preapproval: Work with your lender to get preapproved. This will let you know how much house you can afford and strengthen your bargaining power.
- Start house hunting: From here, you’re good to start looking for houses. Once you find one you like, you can submit an offer that day. If it’s accepted, your loan will go to underwriting. Assuming it’s approved, you’ll be clear to close.
With a score that low, you’ll probably have a hard time finding a reputable lender willing to approve your VA loan. You should also be on alert for scammers, and know that even if you manage to secure a loan, you’ll probably pay higher interest rates.
Instead, you may be better off improving your credit score over the next few months. This will open up more lenders to choose from and save you money on interest.
VA lenders will want to see an applicant’s COE, which proves eligibility for the program. They’ll also review their DTI ratio and credit history. Those thresholds will vary from lender to lender, as the VA doesn’t mandate minimums. Instead, the VA requires lenders to review the entire loan profile.
If you qualify for a COE, VA loans are easier to qualify for than conventional loans, as there’s no down payment requirement, and lenders set their own minimums when it comes to credit history and DTI ratio.
For VA Loans, Lenders Review the Entire Loan Profile
The VA doesn’t mandate minimums because it instructs mortgage lenders to review an applicant’s entire loan profile.
Although minimum credit scores aren’t mandated by the VA, you can still benefit by having a higher credit score. As a general rule of thumb, the higher your credit score is, the more favorable your loan terms will be.
The Short Version
- The VA doesn’t mandate a minimum credit score for applicants, but their policy requires that mortgage lenders review an applicant’s entire loan profile
- In effect, this allows lenders to set their own credit score limits, so long as they still review everything
- Mortgage lenders will also consider an applicant’s debt-to-income (DTI) ratio
U.S. Department of Veterans Affairs. “VA Home Loans.” Retrieved April 2023 from https://www.benefits.va.gov/HOMELOANS/lender_state_volume.asp
U.S. Department of Veterans Affairs. “VA Guaranteed Loan.” Retrieved April 2023 from https://www.benefits.va.gov/BENEFITS/factsheets/homeloans/VA_Guaranteed_Home_Loans.pdf
Federal Deposit Insurance Corporation. “203(b) Mortgage Insurance Program.” Retrieved April 2023 from https://www.fdic.gov/consumers/community/mortgagelending/guide/part-1-docs/203b-mortgage-insurance-program.pdf
U.S. Department of Veterans Affairs. “VA funding fee and loan closing costs.” Retrieved April 2023 from https://www.va.gov/housing-assistance/home-loans/funding-fee-and-closing-costs/