What Credit Score Do You Need for a VA Loan?
- Overview of VA Loans
- Credit Score Requirements for VA Loans
- How to Improve Your Credit Score
You may be wondering what credit score is needed for a VA loan. VA loans are available to eligible veterans, active-duty service members, reservists, National Guard members, and certain surviving spouses.
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Overview of VA Loans
A VA loan is a mortgage loan that is guaranteed by the U.S. Department of Veterans Affairs (VA). The loan is issued by a private lender, such as a bank, credit union, or mortgage company, and is backed by the VA. The VA guarantees a portion of the loan, which protects the lender from losses if the borrower defaults on the loan.
What is a VA Loan?
A VA loan is a mortgage that is made by private lenders, but partially backed by the Department of Veterans Affairs. The program was created to help veterans and service members afford homes, but there are also benefits for qualifying spouses and surviving spouses. VA loans can be used to buy a single-family home, condominium, manufactured home, or to build a new home. You can also use VA loans to refinance an existing home loan, and there are a number of different options for how you can structure your loan.
Who is eligible for a VA Loan?
To be eligible for a VA Loan, veterans, service members, National Guard members, and reservists must meet the basic service requirements set forth by the Department of Veterans Affairs. Additionally, homebuyers must also intend to occupy one of the home’s units as their primary residence. Individuals who would like to obtain a VA Loan are also required to obtain a Certificate of Eligibility (COE).
The first step in obtaining a COE is to fill out an application. Homebuyers can get started on their application by visiting the eBenefits website. Once logged in, applicants will need to fill out and submit VA Form 26-1880. After the application has been completed and submitted, individuals will need to gather any supporting documentation that may be required. The final step in obtaining a COE is to submit all required documentation to the VA Eligibility Center.
Generally speaking, most veterans and active duty service members will meet the basic service requirements for a VA Loan. However, there are some exceptions. For instance, individuals who were discharged from service due to misconduct may not be eligible for a VA Loan. Additionally, reservists and National Guard members who have not completed six years of service may not be eligible for a VA Loan.
Credit Score Requirements for VA Loans
One of the first questions borrowers want to know when they begin exploring their VA home loan options is what credit score they’ll need. The answer isn’t always simple, but in general, you’ll need a credit score of at least 620 to qualify for a VA loan. In this section, we’ll cover credit score requirements in more detail.
Minimum Credit Score for VA Loans
The minimum credit score for a VA loan is 580. However, lenders may require a higher score depending on their individual requirements. For example, some lenders may require a minimum credit score of 620 for a Va loan.
VA loans are available to eligible veterans, active duty military personnel, and their spouses. These loans are backed by the Department of Veterans Affairs and offer several benefits, including low or no down payment requirements and no monthly mortgage insurance premiums.
To qualify for a VA loan, borrowers must have a steady income, satisfactory credit history, and enough funds available for a down payment (if required).
Other Factors That May Affect Your Eligibility for a VA Loan
In addition to your credit score, there are a few other factors that may affect your eligibility for a VA loan. Your lender will consider your debt-to-income ratio, your employment history, and your overall financial profile.
How to Improve Your Credit Score
If you’re planning on taking out a VA loan, you’ll need to make sure your credit score is high enough to qualify. The higher your credit score, the lower your interest rate will be. A good credit score is important not only for VA loans, but for any type of loan you may want to take out in the future. Here are some tips on how to improve your credit score.
Check Your Credit Report for Errors
One of the best things you can do to improve your credit score is to check your credit report regularly for errors and dispute any that you find. You’re entitled to a free copy of your credit report from each of the three major credit reporting agencies — Experian, Equifax, and TransUnion — every 12 months. You can get them all at once from AnnualCreditReport.com or spread out over the course of the year by staggering your requests: one from Experian now, one from Equifax in four months, and one from TransUnion in eight months.
If you find an error on your credit report, contact the credit bureau to dispute it. The bureau will then investigate and, if it finds that the error is valid, will correct it on your report. This process can take a few weeks but is worth it to make sure that your report accurately reflects your credit history.
Make Your Payments on Time
One of the biggest factors in your FICO® Scores is your payment history. It’s also important to avoid maxing out your credit cards, even if you’re able to pay the balance in full each month. Using too much of your available credit limit can hurt your scores.
Use Credit Cards Responsibly
If you have credit cards, use them responsibly. That means charging only what you can afford to pay back in full each month, and making payments on time. (Payment history is the biggest factor in most credit scoring models.)
If you carry a balance from month to month, try to keep it low relative to your credit limit ( below 30% is good). This will help keep your credit utilization ratio down, which is also good for your score.
Lower Your Debt-to-Income Ratio
One factor that affects your credit score is your debt-to-income ratio (DTI). Your DTI is the percentage of your monthly income that goes towards debt payments. The lower your DTI, the better for your credit score.
There are a few ways to lower your DTI:
1. Pay down your existing debt. This will immediately lower your DTI.
2. Increase your income. If you can find a way to bring in more money each month, you’ll be able to lower your DTI by making the same debt payments on a larger income.
3. Freeze or close unused lines of credit. If you have any credit cards or loans that you don’t use, consider freezing or closing them. This will reduce the amount of available credit you have, and therefore lower your DTI.
Consider a Credit Monitoring Service
If you’re trying to improve your credit score, you might want to consider signing up for a credit monitoring service. Credit monitoring services can help you track your credit report and score, and they can also provide you with alerts if there are any changes to your report. This can help you keep on top of your credit situation and make sure that you’re taking steps to improve your score.