Can You Get a VA Loan With Poor Credit?

VA loans are granted by private lending institutions and underwritten and insured by the Department of Veterans Affairs. This allows veterans to have access to special government subsidized programs that assist them in the purchase of a home. However, just like any other type of mortgage, there are guidelines that must be followed in order to qualify.

Credit History

While credit history does play an important part in a VA loan approval, it is not an extreme driving factor. Missed payments, late payments or collections over a year old will often not be considered in rendering a decision toward a VA loan.

Debt

Eligible veterans applying for a VA loan will need to have their current debt load evaluated and have all open credit lines reviewed. If an applicant's debt exceeds 45 percent of his monthly pre-tax income, he will be required to pay off or pay down certain credit lines in order to obtain a loan approval.

Collections

Any items that were put into a collection status on a credit report within two years of applying for a VA loan will either need to be disputed, paid or settled with the creditor in order to obtain a VA loan approval. However, this is only applicable for collection accounts of more than $400. Smaller collection accounts will not be evaluated.

Time Frame

Applicants with challenges on their credit history can take longer to receive underwritten approval for a VA loan. This can take up to 30 days in some cases.

Misconceptions

Many veterans are not aware that they are eligible for VA loans. Any armed forces veteran or National Guard member is eligible for VA home loan financing providing that they were released on an honorable discharge basis from service. Furthermore, VA loans are not only for active duty servicemen and women.

Winning Deal

VA home loans are arguably the best way to finance a home, considering that they require no money down from the veteran or their family. They also offer lower interest rates and other benefits in many states.

References

• VA Pre-Qualification