Can I Get a VA Home Loan with a Low Credit Score?

Darrin Seppinni
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Part of the Department of Veterans Affairs objective is to help support the American Dream of homeownership. However, the VA does not finance the homes, they guaranty a portion of the loan amount.

The following paraphrases the VA's objective:

You have defended it, now go on and live that American Dream.

The individual VA lender, who receives a guaranty from the VA, has the option of establishing their own VA underwriting guidelines.

The reality is, these days most VA lenders will rely solely on ‘AUS’ an ‘Automated Underwriting System’ to determine a Veterans eligibility. Your creditworthiness is evaluated with the use of algorithmic scores provided by the three major credit repositories.

Did you know we offer VA loans? Learn more information here, and connect with us here.

But, not all VA lenders underwrite the same

Perhaps one of the greatest benefits of a VA loan is that an approval is measured against relaxed credit requirements. In fact, VA doesn’t have a credit score requirement. Therefore, a handful of VA lenders remain ‘old school’ and continue to manually underwrite the VA mortgage application while maintaining within The Department of Veterans Affairs’ requirements.

So, how do I know if I qualify for a VA mortgage?

Simply, you can’t have any major credit events in your credit history in the last 2 years. A major credit event is a bankruptcy, short sale, or foreclosure. In addition, you will need to demonstrate you have been on time with your rent or mortgage payments for the past 12 months from the time you apply.

Then think about any minor derogatory credit over the past year? If the answer is yes, don’t worry, because minor hits to your credit profile that can be legitimately explained do not disqualify you from a VA home loan.

  • Medical issues
  • Old collection accounts
  • High credit cards balances
  • Settled Federal tax liens

Keep in mind any open state or federal tax liens, and any collections with a $2000 balance or greater may need to be paid to qualify for a VA home loan.

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But, can you get a VA home loan with a 560 Credit score?

The short answer? Yes, and here’s a Real Life Example:

Marie Scott, a veteran wanted to buy a home with her husband. They both worked full-time, earning plenty of income to afford a new home in their hometown of Orlando, FL. The problem were lingering collections due to medical issues since her discharge from service. These collections were bringing her credit score down to 560.

Marie was turned down for a VA home loan with a major mortgage lender. However, she wasn’t quite ready to give up hope on homeownership. Her diligence paid off when she came across Homelife Mortgage who was willing to have her loan ‘manually underwritten.’

Within a few days, she was Pre-approved and shopping for her first home. Marie not only purchased her new home with No money down, but NO out-of-pocket costs. All her closing costs were paid for between her Realtor and Seller. VA allows up to 4% of the purchase price to be credited towards closing costs.

Thankfully a low credit score did not prevent Marie from her dream of home ownership.

The Take-Away

VA mortgages are available if you happen to have a lower credit score. However, you are advised to begin the VA loan process with an experienced VA mortgage specialist that is willing to put in a little extra work and effort with a manual underwriting process.

While many lenders shy away from VA and FHA loans, due to their intricate, rigid underwriting guides, we have honed our VA processing skills helping hundreds of satisfied homebuyers since 1990. Homelife Mortgage is proud to provide Veterans with a free consultation and for homebuyers we provide a Certified Pre-Approval Certificate, allowing you to shop for a home with confidence.

If you’re looking for a VA Home Loan, know that we can help you! Click on this link to read more about our VA Loan options, as well as how to get started.

Get your VA Loan now!

More Content For You: 

The Advantages of a VA Loan


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About HomeLife Mortgage

For more than 25 years, HomeLife Mortgage has built a strong reputation in California and Florida as a leading mortgage broker, servicing the needs of borrowers who have been unable to obtain conventional financing.  HomeLife Mortgage is at the forefront of non-bank lending offering the next generation of mortgages including Jumbo Non-Prime Loans, Real Estate Investor Loans, Bank Statement Loans, FHA Loans and VA Loans.

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