How do credit scores affect VA loan approval?
Credit scores have an impact on determining your eligibility for a mortgage, as they can show your debt repayment history. With that in mind, it’s necessary to understand that while a low credit score won’t always prevent you from getting a VA loan, if you have a higher score, you can get better interest rates and loan terms. .
You should also be aware that when you borrow money your score may change. A lender may deny you a loan if your score drops during the application process. To avoid this, we recommend that you avoid taking on any new debt (like car loans, credit card purchases, etc.) until the application process is finalized. This will help avoid any decline in your credit score.
VA Loan Credit Score Requirements
Regarding VA loan requirements, meet the required credit score is one of the many essentials for loan approval. Lenders want to see that you can manage your credit and debt, so they look at the following factors:
- Credit history: Private mortgage lenders will analyze your credit history to see how reliable you are and whether you’ve paid your bills on time over the past 2 years. For this reason, it is important that you consistently pay your bills on time or that you do not accumulate outstanding balances.
- Employment and income: For most home loans, lenders want to confirm your employment and income to determine if you can afford a mortgage, and VA loans aren’t too different. Lenders will ask for employment verification to verify that you have a reliable source of income to make your loan payments. However, where demobilized veterans have less than 2 years of employment, they must also provide details of their military service and deployments.
- Debts: Lenders must verify that you have no federal debts before approving you for the loan. Some debts may include student loans or even other VA loans you may have had before.
Use of credit: Credit usage is the amount of available credit currently in use. This percentage tells the lender if you represent a loan risk. For example, using 100% of your credit will lower your score; instead, you should maintain 30% utilization. In other words, a low utilization rate indicates that you are unlikely to extend your debts.