When applying for a conventional loan, you are likely to score better rates with a high or excellent credit score. This is why you might want to fix or improve your rating first before obtaining a mortgage. When it comes to VA loans, however, there is no minimum required credit score to qualify for one.
This is one of the many benefits of this mortgage, including no-down payment financing and low closing costs. The main reason for this is that the US Department of Veterans Affairs insures all VA mortgages.
If you qualify for this loan, do take note that many private lenders who offer VA loans might still have their own credit score requirement. According to PRMI Hendersonville, most require a score of 620 or higher, but there are still those who accept applicants with lower scores.
Risks on Lenders
VA loan companies in Hendersonville note that a poor score might not necessarily prevent you from obtaining a loan, but a higher score may allow you to score better rates and terms.
While loans are backed by the VA, the department itself doesn’t actually issue the loans. Private lenders and lending companies do, which means they take some risks by allowing an applicant to borrow the money.
Better Score, Better Terms
Just like in conventional loans, lenders are generally more comfortable in giving the best rates and terms to those with excellent credit. Most lenders prefer borrowers with a high a credit score as this demonstrates better financial discipline.
This means that you’ve been on point in meeting your financial obligations, including car loans, credit cards, and other forms of debt.
A Host of Other Benefits
The main benefit of VA, however, is that that the required credit score is much lower. There are also a host of other benefits such as lower average rates, no prepayment penalties, no down payment and no private mortgage insurance (PMI).
But then again, you might want to make yourself an attractive buyer with a high credit score to quality for better rates and terms.
While lenders look into your credit when screening applicants for a VA loan, it isn’t the only requirement. They also consider your current income, duty status, length of service and character of service. If you think you qualify for this loan, it is best to talk to a reputable VA lender.