VA Loan: Factors That Compensate A Lower Credit Score
Homebuyers who are planning to purchase a home can find a good loan option in the form of a VA loan. VA loans for low credit scores are an option that is available to veterans and those serving in the US military. This loan is authorized by the Department of Veteran Affairs, however VA loans for low credit scores are issued by lenders who are approved by the department.
VA loans for low credit scores have become one of the most common and popular loan options due to a number of reasons, but the main two reasons why VA loans are such a popular loan option consists of:
- There is no need of a down payment with a VA loan for low credit score
- There is no need to pay for mortgage insurance
VA loan requirements
To apply for VA loans for low credit scores, certain conditions and requirements must first be met before an applicant is approved for a VA home loan. The following are some of the basic requirements that are set by the department, however, keep in mind that each individual lender has their own specific set of requirements and conditions.
- To apply for a VA loan, an applicant must ensure that there are no late payments in his/her statement for the past 12 months.
- Must have a steady income of minimum 2 years
- W2’s and tax returns
- Maximum DTI ratio 43%
- Applicant must show 2-3 months of bank statements
- 2 months of mortgage payments in reserves
How to get a VA loan for low credit score
So you are unsure whether or not you are eligible for a VA loan due to poor credit score? Not to worry because there are certain factors that can compensate for a low credit score. These factors include:
- Large down payment
A larger down payment can increase your chances of qualifying for a VA loan despite lower credit scores. Since applicants with low credit scores tend to pose as a risk for the lender, a larger down payment provides a form of security to the lender.
- High income
Some lenders are willing to overlook the lack of credit scores if the applicant has a steady job and high income.
- Length of time at your current job
Lenders tend to be extremely wary of those applicants who are unstable and have not been able to hold down a stable and steady job over a period of time. Therefore, even if you have lower credit scores, a stable job is able to compensate for that.
- Lower amount of debt
Although low credit scores are one of the factors that determine whether an applicant would be approved for a VA loan or not, a lower amount of overall debt that you owe can actually work in your favor and compensate the lower credit scores.
Joan Gallardo with his 18+ years of experience as Senior Loan Officer is a wealth of knowledge dealing with VA lenders for low credit scores. Through his articles, you can get to know about the various requirements of VA lenders for low credit scores along with information on eligibility criteria and benefits.