Recently, the Department of Veterans Affairs announced that it had guaranteed its twenty-one-millionth home loan. Created in 1944, in gratitude for the military service of returning World War II veterans, the popularity of VA home loans has boomed over the previous decade. In the past two years alone, over a million VA loans have been insured. In 2004, only two percent of all active mortgages were financed via the VA housing program. This year, that number has jumped to eight percent. In 2012, 1.5 million veterans maintained mortgages, which had been secured with VA insured financing. Thirteen percent of all veterans have used this entitlement. As a result of an estimated one-million active duty service-members being discharged within the next five years, it is believed that loan usage will continue to expand.
Numerous benefits make the loan an appealing financing option. The program features quality interest rates, no money down, refinancing options, and several cost savings entitlements. Perhaps most auspicious is that there is no credit score requirement for a VA loan.
The VA has not set a standard score. Poor credit scores will not be the sole reason the applicant is rejected for financing. Generally, the program only assesses the previous twelve months of a candidate’s history. Additionally, the program does not correlate interest rates with scores, meaning a good score will not result in a better rate, and a poor score will not result in a higher rate.
However, depending on the type of VA loan and purpose, each investor may have their own credit score overlay. This overlay may use set guidelines but can be accepted on a case by case basis. This will also vary by state and each borrower’s individual circumstances.
Lenient underwriting guidelines are paramount for many potential borrowers. Per the National Mortgage News, VA borrowers on average have less than $7,000 in total assets. Furthermore, eight out of ten program borrowers would be unable to qualify for conventional financing.
In some cases, credit score is not required. In other cases adjustments and exclusions can be granted. Additionally, VA Home Loan Centers has credit qualifying assistance programs and staff counselors, who can help you dispute items, rebuild your credit, settle loan balances and increase your credit score.
To find out exactly what government insured mortgage product and amount you will qualify for, call the VA Home Loan Centers applications desk at 888-573-4496
