Getting approved for a VA loan with low credit score is possible on a home purchase and refinance. The big box lenders want 620+ score but the VA allows much lower. Today we cover everything you need to know about how to get approved for a VA loan with low credit. 

How low can your credit score be on a VA loan?

The VA allows approval as low as 500 credit score. 

There are a lot of caveats that come with that, and conditions that need to be met. 

This is available on home:

• Purchase
• Refinance
• Cash out refinance

VA loans are allowed on primary residence only. 

Home Purchase | VA Loan Low Credit Score

There are way too many eligible veterans who are renting because they think they don’t qualify to purchase a home because of having bruised credit. 

Did you know you can put 0% down payment on a home purchase with a VA loan even if you’re below 620 credit score?

If you’re 580+ credit score, you can still put 0% down. 

If you’re 500-579 credit score, you will need to do at least 10% down payment.

The thing you have to keep in mind is: you’re paying a mortgage even when you’re renting. You’re just paying your landlord’s mortgage and helping them build equity. 

If you’re holding off on buying a house because your credit isn’t perfect, I encourage you to reconsider. 

When you own a home you build equity naturally by paying the mortgage down every month, AND through market appreciation. 

Rate and Term Refinance | VA Loan Low Credit Score

A rate and term refinance is when you refinance to lower your current interest rate, or to shorten the term of your current loan (example: going from a 30 year loan to a 15 year) which can save you 10s of thousands of dollars over the life of the loan. 

The VA is very serious (as they should be) about requiring a net benefit to the veteran when allowing a refinance to be completed.  

Your loan officer will be able to let you know if there is an option that makes sense

Cash Out Refinance | VA Loan Low Credit Score

There are many potential benefits to tapping into your home equity with a cash out refinance. 

Let’s take a look at a couple major benfits.

Debt Consolidation

If you have high interest credit card debt that you can’t seem to be making progress on paying down, a cash out refinance may be the way to get it paid off. 

Not only will this help lower your overall monthly payments but it also will help with increasing your tax deductions. 

Interest paid on credit cards is not tax deductible. 

Interest paid on your mortgage is tax deductible. 

Home Improvement

Getting a new roof or similar improvement is not cheap. 

Pulling cash out on the home is a great way to come up with the needed funds to make the improvements you’ve been meaning to get around to. 

Leveraging your equity to improve your home will make the home more appealing, and in many cases, improve the fair market value of the property. 

Veteran Eligibility | VA Loan Low Credit Score

If you’re unsure if you have available entitlement, you can always request a copy of your certificate of eligibility here. 

If you’re not eligible for VA financing, an FHA loan may be your solution.

Multiple VA Loans | Previously Used Entitlement

For some reason, many veterans think they can only use their VA benefit once. 

That is absolutely not the case. 

You can use your VA loan benefit as many times as your available eligibility allows. 

I personally have used my VA loan benefit on 6 different homes. Not all at once of course. 

If you sell your home, and pay off the current VA loan, you restore the previous entitlement that was used. 

Even if you have had a short sale or foreclosure on a home that had a VA loan, you still may have bonus entitlement available to you for another VA loan. 

Your loan officer will be able to determine if you have sufficient available entitlement for the new loan. 

Bonus Tip | VA Loan Low Credit Score

When filling out your application, be sure to give complete 2 year history for all employers. Make sure your application is completely accurate so that your lender can understand the full situation. 

When providing supporting documentation (pay stubs, W2s, etc.) be sure to have everything organized and provide complete and legible copies of all documents. 

This will help reduce the need for duplicate requests, and will reduce the amount of time it take to close your loan. 

In Summary

Getting approved for a VA loan with a low credit score is absolutely possible in many cases.

It’s extremely important to work with a lender that is highly experienced with these types of loans. 

This is available on a:

• Home purchase
• Rate and term refinance
• Cash out refinance

Find out which option would work for your scenario. 

I invite you to reach out.

Get your questions answered. 

We have been able to help many borrowers all over the country get approved when other lenders said it wasn’t possible. Reach out to see if we can accomplish your goals. And if for some reason we can’t, we’ll absolutely do our very best to point you in the right direction to set you up for success.