VA loans

VA Cash Out Refinancing Loans and Credit Scores

May 21, 2012

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VA Cash Out Refinancing Loans and Credit Scores

A reader asks, “What does my credit score have to be to be able to refinance my home with cash out? What of the three scores are looked at?”

When it comes to credit scores for VA guaranteed home loans, the most important factor to remember is not necessarily what’s in the VA loan rules, but what the individual lender requires.

The lender’s minimum credit requirement is key, and many lenders today require a minimum score of 620 or better.

But how does the lender choose which credit score to go with? The borrower must submit an application for the VA guaranteed home loan, the lender must review the application data and pull credit scores from the three major reporting agencies, or a single report combining the scores reported by the three (Equifax, TransUnion and Experian).

Shop around and you may find that a typical lender requirement may be that the lowest score on any of the three reports begins at 620. Depending on lender policies, extenuating circumstances, compensating factors or other circumstances, that credit score requirement may change–but these are reviewed on a case-by-case basis.

As mentioned in other blog posts, VA home loan regulations set minimum standards in many areas but the lender is free to require more demanding standards for credit, debt-to-income ratios or other qualifying factors. The lender cannot be forced to issue a loan to someone who doesn’t meet that financial institution’s credit score requirements.

VA Cash-out refinancing credit score requirements may start at 620 for some lenders, while other lenders may require a score of at least 660, etc.

Appraisals are required for VA cash-out refinancing loans and the primary occupancy requirement remains in effect–as opposed to streamline refinancing loans which require the borrower to certify that the home was the primary residence during the original mortgage.

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