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A veteran can easily get a home loan with bad credit. The U.S. Department of Veterans Affairs understands that many veterans experience financial difficulties that regular civilian homebuyers do not. That is why, there are VA loans to help retired active-duty service members to get a home. The VA loan stands for Veterans Affairs loan and is easier to acquire for veterans than you think. Thanks to this option for veteran home loan, a loan lender can lend to a surviving eligible spouse, veteran or a service member. Moreover, the Department of Veterans Affairs makes sure to guarantee the loan, making VA loans different from other kinds.
VA Loans for Bad Credit: Everything Veterans Need to Know
In this section, we will learn everything veterans need to know for VA loans for bad credit. Veterans can easily get a VA loan with bad credit thanks to favorable terms, especially because the U.S. Department of Veterans Affairs is aware that service members often experience financial pitfalls. However, the definition of “bad” or fair credit will definitely differ from one lender to the other. That being said, it’s not so difficult to acquire a loans for service members. As a rule of thumb, anything below the 620 FICO score is considered as “bad” credit. Other than the bad credit score, there are certain minimum service requirements for borrowers, in order to get a VA loan from mortgage companies. Any service member who has gotten a dishonorable discharge will not be a qualified borrower for a VA loan. However, if you were honorably discharged, your qualification will be based on the time you served. Moreover, if you are presently a service member, you must have had 90 days of continuous duty without any break.
Getting a VA loan with bad credit
Getting a VA loan with bad credit is easier than you think. Veterans have hard time when adjusting to life as a civilian. That is why, they often fall prey to difficult financial situations and may not have a strong credit history. In such times, the VA loan can be handy because there are several loan benefit associated with this type of loan. Firstly, there is often no need for a down payment. Secondly, military home buyers don’t have to worry about their credit scores either. They also do not have to pay closing costs. While different private lenders may have different definitions and credit score requirements, overall, bad credit is accepted since it is understood that veterans may not have the perfect credit score when they return to civilian life. Plus, with VA government-backed loans, the loan interest rates are also often low for potential borrowers. Credit blemishes are very common for veterans and the Veterans Affairs acknowledges that, and as a result, these loan terms are so flexible. Apart from veterans themselves, surviving spouses of service members are also eligible for getting this loan.
Are there specific VA lenders for bad credit?
Yes, there are specific VA lenders for bad credit. Borrowers with credit scores that are low can get a VA-backed home loan from a wide variety of lenders. Many lenders label themselves as such by stating that they give out VA loans to veterans if they have “bad credit”. Obviously, their definition of a bad credit might be different but, you can always go to another lender who may accomodative of your credit profile. However, it is your job to see the lender fees, costs as well as fine print.
When will lenders accept VA loans with bad credit?
Lenders accept VA loans with bad credit when they see that your mortgage monthly mortgage payments have been paid regularly and in full in the last 12 months. Compared to personal loans, they basically see whether or not you have paid your bills on time and if there are late payments and the credit limit is low. While bad credit is generally accepted, they do take a look at your payment history to approve the loan. Plus, you have to meet the minimum requirements for the loan as well. Firstly, you must have served 90 continuous days during wartime and you must have served 181 continuous days during peacetime. Other than the minimum credit requirements, your qualification is also based on the time you served. Depending on which war you served and what time, the loan requirements vary, which is why you must look into it.
What is the lowest credit score you can have for a VA loan?
It is important to understand that there is no “lowest credit score” you can have for a VA loan. There is no minimum credit score requirement as already mentioned, anything under 620 is usually considered a poor credit score. And, while you can get a VA loan with a loan under 620, remember that it will obviously be harder since not all lenders will be willing. That being said, VA lenders do look for certain other things than only your “poor credit”. For instance, they see whether there has been any improvement in your current credit score over the last two years. Your credit score might be considered low, but they see if it has become a little higher in the last few years or any worse. Secondly, they also see whether or not you have been paying your mortgage time payments in the last year. Furthermore, they also see whether you have been paying in full or not. Lastly, lenders also prefer to look into your residual income and see that it can pay the mortgage payment easily or not. Furthermore, if bankruptcy is the reason, you only have to wait for 2 years to get VA loan, compared to the 4 years for conventional home loan options. It is important to remember that lenders set credit requirements and they vary depending on the lender. Overall, you just have to make sure that your credit score hasn’t worsened dramatically in the last year or so. It it has, it is going to be even more difficult to fina a lender who will approve your loan.
Is it possible to get a VA loan with bad credit?
Yes, it is possible to get a VA loan with bad credit. The VA guidelines keep the military borrowers and their unique needs in mind. The adjustment to the civilian lifestyle can sometimes call for financial difficulties that are sudden and unexpected. Therefore, there are option for borrowers and VA loans to make sure that military service members can get out of their financial hardships easily. There are several credit flexibilities that come with VA loans. They are discussed as follows.
No minimum credit score: Unlike conventional mortgage home loans, with VA loans you don’t have to worry about a credit score minimum. However, the definition of bad credit and loan details can differ and there are certain lenders that expect the 620 minimum score. Nevertheless, there are also numerous mortgage lenders that have no such restrictions. And, while the low credit score is accepted, they do look into your mortgage payments in the last few years and whether or not there has been any improvement in your credit score in the last year or so.
2 Year wait after bankruptcy: With a traditional mortgage, one has to wait for 4 years to get a loan after bankruptcy. However, with VA loans, the wait is 2 years shorter. That is because, the VA understands that sometimes the service can cause bankruptcy issues, which is why the wait period is only 2 years.
2 year wait after foreclosure: Just like veterans have only a 2-year waiting period to get a home loan after bankruptcy, the waiting periods are only 2 years to get a home loan after foreclosure. Any service member who lost their home due to foreclosure only has to wait around for 2 years to get a new loan.
Negligible credit history: With a non-VA loan, credit history is a big deal. However, with VA loans, there is no such restrictions that you must abide by for a credit history. That is because veteran prospective home buyers often do not have much to show when they return from service. In such a case, lenders consider utility, rent or other payment histories for the loan approval.
Residual income: Even if you have bad credit, you can get a VA-backed loan if you have residual income to pay off your mortgage payments. This means that after completing all the payments in a month, if you have enough income for your mortgage, your loan may be considered.
Foreclosure flexibility: Eligible veterans can get a fresh VA loan despite a VA loan that is foreclosed. They can do this using the loan eligibility certificate. In case, qualified veterans with military experience have enough entitlement remaining, they can purchase a house with zero down payment with their certificate of eligibility.
How veterans with disabilities can get a VA loan with bad credit
Veterans with disabilities can get a VA loan with a bad credit rating easily. As mentioned above, there are many flexibilities associated with a VA loan and very few loan limits. One such flexibility is that veteran home buyers with a service-related disability can easily get their hands on a VA loan. They can get a mortgage with zero percent down as well as the lowest interest rates. Moreover, they can also get home improvement grants so that veterans with disabilities can make accessible home. Plus, they also do not have to bear any VA funding fee. All such flexibility is given because service-connected disabilities are common and greatly affect the lives of veterans will lead to a bad financial picture. To make things easier, these loans are granted with a wide range of flexibilities.
For more information to Veterans loans contact the Cain Mortgage Team Today.
