What Credit Score Do You Need for a VA Loan?

The United States Department of Veterans’ Affairs (VA) is known for the health care it provides to veterans. The VA is a cabinet-level agency of the federal government and serves military veterans and their families through an assortment of programs. 

In addition to providing benefits like healthcare and education, the VA is also in the mortgage business! The agency does not actually loan money to home buyers, but it does offer to back up certain mortgages. The VA loan program guarantees home purchase and refinance loans that are underwritten to specific criteria. The program is essentially an insurance policy for lenders who qualify and make VA loans. In other words, if the veteran-borrower defaults or the home must be foreclosed upon, the VA will reimburse the lender for the lender’s losses. The program began in 1944 and remains an attractive loan product for qualifying veterans and their families.

Things to Know Before You Apply

VA loans are underwritten and appraised to a unique set of standards. The veteran-borrower can apply for a VA loan to finance the purchase of an existing home, for new construction, or to refinance a mortgage already in place. VA loans may also be assumed by qualified applicants.

• A qualified applicant could be a veteran who meets certain service requirements, an active duty service member, certain reservists and members of the National Guard, and certain spouses of deceased veterans.
• A down payment is probably not required. This is also known as 100% financing.
• Veteran-borrowers may be asked to pay a VA funding fee.
• There are some fees not allowed to be charged to the Veteran, such as a termite inspection.
• The appraiser may request repairs or cleaning of the property. If this happens, the underwriter will probably mandate the repairs or cleaning by making this a closing condition.
• Mortgage insurance is not required on a VA loan.
• The loan-to-value ratio (LTV) is not subject to a firm upper limit. The underwriter must complete a thorough review when determining whether the borrower/s has/have the capacity to repay the loan.
• The VA does place a limit on the amount of a loan it will guarantee for each loan and each veteran. Applicants should inquire with their loan officer as to the amount of entitlement available.

How Important is Your Credit Score?

VA loans are unique in their approach to credit scores. The VA states in its program history manual that “the Government should provide the means whereby the Veteran could obtain favorable credit.” The U.S. government recognized that veterans were likely to miss opportunities to build credit during active service. One of the goals of the VA loan program was and still is to offer veteran borrowers an opportunity to establish a financial identity similar to that of their civilian peers.

There is no minimum required credit score to qualify for a VA loan. However, the loan must still be professionally underwritten to the standards set forth in Chapter 4 of the VA Lender’s Handbook. Underwriting standards for VA loans place less emphasis on credit history/score but require thorough documentation of income.

How to Apply

Find a great mortgage company that offers VA loans (not all lenders do). Ruoff Mortgage can put you in touch with a loan officer who specializes in VA products. The applicant may be asked to furnish a Certificate of Eligibility (COE) before underwriting can proceed.

Thank You

Thank you to all Veterans, Active Duty Service Members, Reservists, National Guard, and military families for your service and sacrifice.