VA Loan Reader Questions: How Does Bad Credit Affect My Chances?
A reader asks, “My husband is 100% service connected disabled. We are wanting to inquire about getting a VA home loan…problem being we both have horrible credit. Would we be eligible, or not?”
Technically speaking, a VA loan applicant is eligible to apply for a VA mortgage when he or she has met the minimum time in service and/or discharge requirements where applicable. But obtaining VA loan eligibility is not the same thing as VA loan approval.
VA mortgage loans require credit qualifying information the same as any other line of credit. Borrowers for all types of home loans (conventional, FHA, or VA guaranteed loans) are encouraged to begin preparing for a home loan at least one year prior to applying for it.
Anyone who is serious about applying for a VA home loan should plan to request a copy of their credit report, examine credit scores and work on improving their credit where needed.
According to the Cleveland VA Regional Loan Center publication Steps To A VA Loan, “Home buyers may want to contact a lender even before they sign a contract for a home, so that they can be pre-approved to determine their maximum mortgage amount.”
But before taking that step, the VA encourages borrowers to fill out a Prequalifying Worksheet, which “will give you a general idea of what you can afford, and whether you are within VA underwriting guidelines for approval. This Prequalifying Worksheet is not a commitment to lend, nor can it be used to determine whether a lender will approve the VA loan…”
Borrowers who already suspect they have poor credit should consider credit counseling or housing counseling to learn how to improve a credit score prior to applying for a VA guaranteed home loan. Did you know there’s a list of government-approved housing counseling agencies you can search to find a reputable agency near you?
These agencies, while not directly affiliated with the Department of Veterans Affairs, are FHA/HUD approved and can help borrowers learn ways to become better candidates for a VA home loan.
Do you have a question about VA guaranteed home loans? Ask us in the comments section.