VA Home Loan Credit Requirements EXPOSED What You Need to Know

The VA has very specific requirements around credit that can make or break your loan approval, but you might be surprised to learn that it's not the score alone that will determine your ability to use the VA Home Loan Benefit. So in this video, we're going to break down exactly what the VA's requirements are for credit scores, what they're going to be looking for in regards to what's on your credit, and how the VA and the lender both play a unique role in your ability to use the VA loan. So first, let's dive into the different roles that go into the loan process. You see, one role is going to be the VA, while the other role is going to be the lender. What you need to understand about the VA is the VA's job is first to determine eligibility, and eligibility actually has nothing to do with standards with regards to credit score. This is just solely coming down to whether you can or cannot use the VA Home Loan Benefit. The part where VA does set requirements is going to come down to guidelines. You see, the VA has very specific guidelines that every qualifying borrower must meet, which brings us to the lender's role. You see, even though the VA has those minimum requirements that are over here, the lender is actually the one that's going to be loaning you the money, which means that lenders can actually add rules on top of the VA's requirements, which are called overlays, to determine what they're going to expect you to be able to meet in order for you to get a loan from them. So one common myth around VA loans is going to be that veterans hear certain requirements from a lender, and they sometimes think it's a VA requirement because unfortunately, lenders do a really good job making it sound like that's the case, when many times, it's actually just their rule. If you go to the VA 26-7, which is a document that lines all of the VA guidelines, you're going to find several different chapters that encompass the requirements to a VA loan. The main chapter when it comes to your ability to qualify is going to be Chapter 4, which is the VA Underwriting Handbook, and this is going to show that there is actually no minimum credit score requirement. Yes, you heard me correctly. In the VA Handbook, it actually states that there is not a minimum credit score set to use the VA loan, but don't write that down. You see, what you need to understand is, as I mentioned before, the VA does not actually do the loan. It's the lenders who do the loan, which means that you need to now understand what's the credit score requirement with the lender that you're considering working with. And most of those lenders out there are going to have a minimum credit score requirement of between 620 to 640. Now, that does not make them bad entities. It's just something that you need to understand because those requirements could make it harder for your ability to qualify if you're even in that 620 to 640 range. You see, what you also want to understand about minimum credit scores is that's just their minimum that you must meet in order for the system to approve you. There could be a situation where your credit score could be over their minimum amount and they actually still deny the loan. And the reason for that is because the loan process doesn't make the minimum standard. It actually is to determine risk. You see, what the lender is going to do is look at not only your credit, they're going to look at your liabilities, your income and your asset. And what they're going to do is submit that information to an underwriting system to determine a risk threshold. And sometimes, even though someone meets the minimum standard, they could be of higher risk or higher risk of borrowing because maybe they haven't paid their bills on time recently or maybe they have several delinquent accounts on their credit profile. This can cause them to still be denied even though they maybe meet a lender's minimum credit score requirement. So this is often why I tell veterans to not get super wrapped up in what the minimum score is because the minimum score is not going to make or break your ability to qualify. It's just really kind of a barrier of entry. Now let's talk about some other things to remember. You see, if you're working with a VA knowledgeable lender that has less overlays on top of the VA loan, like me and my team, we can actually help veterans as low as an 80 credit score. And there are situations where we've even been able to help a veteran that is under that minimum amount through the manual underwriting. Now let's look beyond the score and see what lenders are looking for. One of the biggest things that they're going to be looking at is your payment history. They want to see if you're able to pay your bills on time. And even though you may have had some delinquent accounts or had some late payments that have happened in your past, what they're mainly going to be looking at is how you have been doing over the last 12 months. If you have been paying your bills on time for the last 12 months, this actually does give you a little bit of a leg up regardless of what your credit score is. Now don't get me wrong. This does not guarantee that you're going to be approved. What I'm saying is that having recent delinquencies or recent late payments on your credit can be a surefire reason to actually get your loan denied. So paying your bills on time over the last 12 months and possibly even 24 months can really drastically help your ability to overturn an underwriting decision even if you have a lower credit score. Hey, if you didn't know already, we created a free VA loan resource guide that will help you navigate the VA loan process. So if you want to get tips, tricks, hacks at your fingertips for you to be able to resort back to as you're going through maybe your home buying or refinancing journey, check it out because we not only cover all the information that we have gone over on this channel, but we talk about some other things like unique stories about how veterans have used their VA loan to build wealth or how to build a custom home and questions to ask your builder. This resource guide is to help simplify the VA loan process and we continue to update it over time as information changes. So that way you know that you have the most current information. So if you want to get copies of that free VA loan resource guide, click the link down below in the description and it will get sent over to your email. Some of the things that they're going to be looking at is potentially having had bankruptcies, foreclosures, charge offs, or even collections accounts. These things, especially in a recent time period, can drastically overturn your ability to qualify. So how do you put yourself in the best position to qualify? Let's talk about some action tips. The first thing I would advise you to do is take a look at your credit score. This should only be a very quick look because the credit score again is not the sole thing that I want you to focus on. What I do want you to take a better look at is the credit history. What has taken place over the last 12 to 24 months with regards to your payment history. In some situations, you could dispute certain things that took place on your credit. A dispute does not guarantee that they will remove it, but it does open up the possibility of an investigation into what took place with that delinquent account and also could potentially see that delinquent account be deleted to actually help your scores jump up if it was wrongfully added. If you have credit cards with high credit card balances, I would highly advise you try to pay down those balances to at least 30% or less. This actually does help your scores go up more than you might think. It doesn't have a drastic jump in your credit score, but it helps your scores over time if you continue to manage those balances at 30% or less. For example, if you have a credit card and the limit is $1,000, the goal should be to manage that limit at $300 or less with your running balance because that is 30% of what your overall credit limit is. Some other things that I would advise you to do is work with a VA knowledgeable lender that has the ability to run credit simulations. You see, if you're working with a lender who is looking at your overall situation to determine what you need to do to qualify, this actually will leave you better off than you trying to go down this path by yourself. One of the biggest mistakes that I see veterans and homebuyers making is self-diagnosing or self-qualifying their ability to buy a house, and this actually can cause you to be further away from reaching homeownership. So when you go through the pre-approval process, even if you maybe don't qualify just yet, what you could identify is some action items for you to follow to get you to where you want to go. What my team does is they actually review your overall situation and also have the ability to connect you with a credit specialist that is going to guide you through the process of being able to improve your credit score if that's something that you need. If you want to get connected with my team that can help you go over your VA loan process, click the link down below in the description. I'd be happy to connect you. And remember one very important thing, Jesus loves you and he paid the ultimate price for your life. So if you turn to him, trust in him, and believe in him, he has a beautiful plan and purpose for you and your life.