Low credit VA loans are an excellent options for thousands, possibly even millions, of veterans across the country.
VA loans are one of the most useful benefits available to veterans and qualifying family members. They come with excellent terms and conditions that are usually easier on the borrower than other forms of financing.
One of the most important aspect of this benefit is the low credit VA loan. Some people might assume that because aspects of VA loans, such as the low downpayment requirements, make it so accessible, other factors, such as credit scores, would be used to compensate.
But despite the chance to get a VA loan with a low downpayment, you can find financing with this program while still having a low credit score.
Low Credit VA Loans Create Fantastic Opportunities for Our Veterans
The Advantages of a VA Loan
VA loans are designed to be a significant benefit for people who have bravely sacrificed to serve our country. With this in mind, they come with a variety of advantages that make them more attractive than other forms of financing, such as conventional loans or FHA loans.
The biggest advantage is the extremely low downpayment requirements. More accurately, the entire lack of downpayment requirements. In many cases, saving for a downpayment will keep people from purchasing a home. Downpayments can encompass thousands, even tens of thousands, of dollars, so saving for one can be practically impossible if you are living on a tight income. But with a VA loan, you can secure financing with 0% down. Other loans may require as much as 10% or even 5% down. Some loans that are considered “low downpayment” may still require a 3.5% downpayment. For this reason, numerous veterans choose to use VA loans, as they can enter into homeownership without a large pile of cash.
Another significant advantage of low credit VA loans is no monthly mortgage insurance premiums like PMI payments. Although your loan is insured through the VA, you do not actually have to pay more for this insurance. While mortgage insurance is generally a low cost, over the life of a loan it can equal a significant amount.
There are also limits on the closing costs that can be charged for VA loans, which further increases the initial affordability of these loans.
Although interest rates can change, VA loans often have lower interest rates than comparable financing. Compared to conventional loans and other mortgage loans, VA loans typically have low interest rates.
If you wish to pay off your low credit VA loan early, there are no prepayment penalties. This means that if you decide to repay the loan earlier than your 15- or 30-year period, you won’t be charged an additional cost.
These benefits, and many more, make VA loans highly desirable among qualifying veterans and their family members.
How Do Low Credit VA Loans Work?
A VA loan is one of the most beneficial loan programs available, but the name can be a little misleading. The term implies that the Department of Veterans Affairs (the VA) is the organization actually making the loan. But this is not the case. Instead of loaning money, the VA provides insurance on loans. If the mortgage loan goes into default, the VA provides financial relief to the lender, which reduces or essentially eliminates the risk taken on by the lender.
But the VA does not insure simply any loan. There are some specific requirements that the borrower and the property being purchased must meet. For the borrower, they must be a qualifying veteran or service member, or a qualifying family member, such as a spouse or child. The borrower will also have to meet requirements for debt-to-income ratio, credit, and other factors, although these requirements are often less lenient than other loans.
The VA has loose requirements for their loans, as long as you are a qualifying individual. However, some lenders have other requirements that go above and beyond the requirements of the VA. For example, they may choose to only offer VA loans to borrowers who have downpayments of at least 10%; in this case, the VA is not making this requirement, the lender is. This is what’s known as “lender overlay.”
What are the Credit Requirements for VA Loans?
As you can see, there are many benefits of using a VA loan, but there are still credit requirements. So what are the requirements? Actually, when it comes to VA loans, there are no credit requirements set by the VA itself. This basically means that it’s up to the lenders to determine what credit-score requirements they want to apply to the loan. While the VA loan does not have a credit requirement, lenders who fund these loans will have some form of requirement.
When determining the ability of a borrower to repay a loan, lenders will look at the borrower’s overall credit profile. This will usually include pulling credit reports from the three major credit unions and using this information to calculate your creditworthiness. In many cases, lenders who make these loans offer the financing with easy terms, sometimes as low as 500 credit scores in certain situations.
But a credit score is not the only factor. Your lender will also consider the past credit pattern and use this information when considering your application. If, for example, you have made timely payments for the past year, you are more likely to be approved for the loan.
Proudly Serving Veterans with Low Credit VA Loans
If you want more information on low credit VA loans or other forms of low credit financing, contact our staff today. We’ll help you find the right loan for your specific needs, and we’ll take a common-sense approach to underwriting your loan.
You can even take advantage of the FastTrack program, which helps speed your loan approval. If you are eligible, we’ll send your loan into underwriting using the FastTrack system, which can result in fast approval and, potentially, a faster purchase.
Get the home you deserve with a low credit VA loan through our fantastic team!
EXCEPTIONAL, SUPER EXCEPTIONAL! The most professional, accountable and committed mortgage service we have ever worked with. With numerous experiences in buying and refinancing homes, by far Chad Baker and his team remain at the top of our list. We feel very blessed to have located such a committed company who serve their clients with an exceptional first “first class” mindset.
“Thank you for all the hard work (even on weekends!) you and your team have devoted to seeing this through in a very efficient manner. It’s been an easy process for me and, you and your team have been a delight to work with.”
“Chad and his group made the mortgage approval process smooth and understandable. Multiple updates and explanations during the process kept me informed of progress. Chad also provided great advice on other home services, in particular an insurance company that saved me thousands of dollars a year on home and auto insurance.”