Some lenders may go down, but borrowers often incur additional scrutiny and lender requirements. Different lenders may have different credit rating limits. But a FICO score of 620 is a pretty good barometer for many VA lenders. For a conventional loan, it's often at least that, although for the best rates and terms you may need at least one FICO 740.
Despite this VA flexibility, many individual lenders do impose a minimum credit rating requirement on VA loans. Generally speaking, lenders will require minimum credit scores of 580 to 620 to qualify for a VA loan. However, today, the approval process is fully performed by approved VA lenders. The VA does not approve the loan, but it does issue the requirements that lenders must meet if the lender expects to receive the loan guarantee from the VA.
From debt ratios to employment history, it all depends on the lender. And that, of course, includes the creditworthiness of the borrower. It's true that bankruptcy or foreclosure can stay on your credit report for seven years, but that doesn't mean you have to wait that long to use your VA home loan benefit. 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 wondering if your credit score meets the VA loan requirements, here's what you need to know. If you have a credit score of 620 or higher, then you could qualify for a VA home loan with most lenders. 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. There are many guidelines that the VA has for the loans it supports, but a minimum credit rating is not one of them.
For example, if during the mortgage loan application process, you buy a new car or open a new credit card, then expect a rapid drop in credit, which can negatively affect your loan application. In other words, the VA wants lenders to look at all of a loan applicant's requirements, not just credit scores (for example, 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. If a borrower has sufficient residual income, some lenders will even approve VA loans with credit scores as low as 500. One of the biggest benefits of VA loans is that they allow for lower credit scores than other types of financing.
This is because a higher credit score can improve your chances of getting approved for a VA loan and could also help you get a lower rate. While a low credit score won't necessarily stop you from getting a VA loan, a higher score can mean better interest rates or loan terms. 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.