VA home loans are one of the most powerful wealth building tools available today. Mostly because these government-secured mortgages allow veterans and active duty service members to buy home with little or no money down.
These loans even offer greater flexibility into the credit history of the borrower than, say, a conventional home loan backed by Fannie Mae or Freddie Mac.
However, in order the address the question at hand, we must first define “bad credit.” For VA home loans, borrowers typically need a credit score of at least 620. But that minimum requirement doesn’t come from the VA, it comes from the lender.
The VA actually doesn’t put a minimum credit score requirements on loans it back. But since lenders still take on the bulk of the risk associated with VA loans, minimum FICO scores are common.
Minimum credit scores for VA loans
The fact of the matter is that there’s no clear-cut definition of “bad credit.” Another common phrase you will see lenders use is “less than perfect credit.” Well, since fewer than 1% of the population has “perfect credit,” nearly everyone falls into that “less than perfect category.
Plus, lenders look at a variety of aspects when approving a mortgage, including multiple different credit scoring systems. But for the purposes of this article, we will focus on what your credit score needs to be to qualify for a VA home loan.
VA Home Loan with Bad Credit
Since the VA doesn’t have a credit score requirement, it falls to the bank to make this determination. Since the VA doesn’t actually lend money, but instead acts as a guarantee on the loan, the lenders have a lot of say.
In today’s market, the majority of VA lenders require a FICO credit score of at least 580. That benchmark applies to all borrowers on the application. The average FICO score for VA borrowers is 709, compared to 750 to 770 scores for conventional loans backed by Fannie Mae and Freddie Mac, respectively, according to syndicated columnist Ken Harney.
For more information on if you can get a VA home loan with bad credit, call us today at (888) 320-7888.