Credit Score and VA Loans

The U.S. Department of Veterans Affairs offers a mortgage program for most active-duty and honorably discharged military service members. Those who qualify for a VA-guaranteed mortgage can take advantage of its generous terms, which include financing with zero-down payments and no private mortgage insurance. The VA’s guarantee also makes it relatively easy to qualify for loans so that more veterans can take advantage of the program.

How VA Loans Work
A VA loan isn’t actually a loan from the Department of Veterans Affairs. Instead, when a veteran or service member applies for a mortgage, the VA offers a guarantee for a portion of the loan. This tells the lender that if it has to foreclose on the house and sell it, the VA will be there to cover some or all of the money that the lender loses if it sells for less than what the borrower owes.

Credit Score for a VA Loan
The loan program itself doesn’t have a minimum credit score requirement, according to the VA Lenders Handbook. However, the VA allows lenders to impose their own requirements, which can include a minimum credit score. In addition, the VA does require the lender to perform a credit check and the VA may decline to accept an applicant that does not meet credit standards. The VA isn’t looking for a particular credit score before it guarantees a loan, but it is looking to get a general sense of the borrower’s history and ability to repay the loan.

Beyond Credit
credit report is only a part of the VA loan underwriting process. As with other mortgages, VA lenders look into borrowers’ incomes with a goal of seeing that their total debts are 41 percent or less of their income, although there can be room for some flexibility. Borrowers also need to have proof from the VA that their military service qualifies them for a loan. They also need to take out a loan that is compatible with the VA’s guarantee limit, and they must plan to live in the home that they are buying.


About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.