VA Loan Reader Questions: Credit Requirements and FICO Scores
This is a common question which has answers that aren’t likely to satisfy many because the reply is usually “it depends.”
That’s not to be willfully mysterious–the answer depends greatly on both the borrower’s FICO scores and the lender’s standards. VA loan rules do not specify a minimum FICO score, that’s left up to the lender’s standards.
But FICO score issues can and sometimes are offset by what the VA and the lender know as “compensating factors.” A borrower with marginal FICO scores may offer to make a large down payment which could make loan approval possible. It may also be possible to approve a VA loan if the borrower has substantial cash reserves or other assets that make the loan less of a risk.
The bottom line in the case of this particular reader’s question is that all borrowers to be obligated on the VA home loan must qualify based on the lender’s credit requirements. The credit shortcomings of one borrower cannot be offset by the credit strengths of the other borrower.
And in cases where a non-veteran borrower applies with the veteran, the veteran must not handle a larger-sized portion of the financial responsibility for the VA loan than the non-veteran.
In cases like those represented by the reader’s question above, it’s best to discuss the situation with the lender to see what may be possible based on that financial institution’s requirements.
Do you have questions about VA home loans? Ask us in the comments section–all comments and questions are held for moderation.