Though there is not a lot of info/threads covering VA mortgage loans, what I have found is somewhat dated. At one point there was some info floating around that they don't look much at credit scores - can anybody tell me if that's true? What is the criteria? My H and I have been working on improving our scores, we finally made it over the 620 threshold and then our the last credit card that needed updating did (we are users one of my parent's cc's and the account is approx 22 years old - it was paid off and then my H and I were dropped from it (according to when we pulled our new reports) and so it changed our credit history from 22 years to 7 and 8 years and tanked our scores again - my new EQ is now 574 and my H's is 610). So, I would like to get into a home before the tax credit runs out, but I don't really think I have the time for some of our old lates to fall off to make the scores we need.
So again, we were wanting to go the route of a VA loan but I didn't want to apply if I don't even have a chance at this point - I can't face the dissapointment - I just want to be realistic...
I can share what I learned when I talked to the VA.
1. Yes, they do look at credit scores. The score will affect your rate.
2. They look at credit history. Bads (like late payments and collections) will affect your eligibility.
The lady told me that if the score is too low, they will not approve the loan and issue a VA certificate. She would not define what "too low" of a credit score is.
I just looked in my phone book and I don't have their easy number. If you find it, please post it.
There is this myth going on that VA loan is not score driven. With this ecconomic climate, it takes good scores to get a va loan. Even though va does not stress on scores per se, lenders have the discretion to determine what scores are acceptable. One lo at penfed told me honestly that their cut-off score for va is 680 mid score void of derogs. He further said scores under 680 may be reviewed on a case by case basis and based on his experience, most vets to not close with lower scores. I am not implying that you cannot get a va loan with lower scores; what I want to emphazise is the notion that va loan is less score drive may have been true in the past, but it is now a myth.
There is this myth going on that VA loan is not score driven. With this ecconomic climate, it takes good scores to get a va loan. Even though va does not stress on scores per se, lenders have the discretion to determine what scores are acceptable. One lo at penfed told me honestly that their cut-off score for va is 680 mid score void of derogs. He further said scores under 680 may be reviewed on a case by case basis and based on his experience, most vets to not close with lower scores. I am not implying that you cannot get a va loan with lower scores; what I want to emphazise is the notion that va loan is less score drive may have been true in the past, but it is now a myth.Message Edited by nathan on 09-08-2009 07:03 PM
No, its not a myth and if that company only approved VA loans with a 680 credit scores then you got the wrong LO. People confused themselves on the purpose of FICO scores for applying for a VA loans. There are "NO' universal minimum score when applying for a VA loan. This is left solely up to the lender you are using. The score will decide your interest rate but not in the same manner as a conventional loan. Think about it..interest rates are driven base on the risk the bank is taking lending out money. VA loans are back by the goverment so the bank has no risk should you default on your mortgage. Therefore, you will get competitive rates even with lower scores that you wouldn't dare get with conventional loans are even qualify for that matter. The FICO cutoff score entirely depends on the lender you are using. Some as low as 580 and some as high is 660 just depends on who you are using. Point blanck VA looks at this:
1. Clean 12 month credit history.
2. DTI under 41%
3. Collections Paid in Full
4. Judgements and bankruptcy requires other steps.
What a good FICO score is going to do is help a good interest become a great interest rate. I closed with a 603 mid score at 5.5% and the process took a grand total of two months from finding an agent to closing on the house. The first step is finding a bank and a LO who benefits YOUR situation not settling for their policy.
The point here is that the FICO requirement is lender based and 90% of FHA, VA, etc lenders are requiring 620 or more without compensating factors such as low DTI and/or high reserves. So in reality, just like FHA, Va has now become VERY score driven even if it is not a direct requirement of VA/FHA. The bottom line is that due to the defalut rate on loans with sub 620 scores, FHA and VA are actively going after companies that loan under that if their default rates go higher than the normal average. SO even though they do not require the 620, if you are loaning under 620, you face a much higher chance of FHA/VA review and if loans start to default, a much higher chance of action being taken by FHA/VA. SO, most banks/brokers/investors do not accept sub 620.
That said, there are still some program out there, especially if you have good reserves and low DTI.
With reserves and a high down payment, you should be able to find a lender fairly easy that will go below the 620
It is the people trying to squeeze in with 580 scores, high debt loads, and low cash for reserves/down payment that will have alot more trouble. Liek I said before, comp[ensating factors such as high Down payment and reserves can usually get the FICO score or DTI waived. It may take a few phone calls though to find the right lender.
$0 down, Closing costs paid and 2K credit card paid by seller, 603 mid score, 5.5%...VA loan done in two months.