How to Get a VA Home Loan with Bad Credit

How to Get a VA Home Loan with Bad Credit

12:21 AM April 17, 2019

As a veteran, whether active or retired, buying a home may seem like a herculean task. However, you can get the kind of home you desire, if you follow the instructions in this guide. Read here so you can understand the financial topic: ‘VA loans bad credit.’

Let’s get to it!

Getting a nice and comfortable home is the goal. To get the house you want, you need to overcome the challenge before you: Fico credit score or low credit limit.

In this article, we’ll explain every detail you need to get home loans (as a veteran), how to qualify, and how to improve your credit score.

Let’s get started, shall we?

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VA Loans Bad Credit – Bad credit? No Problem!

how to get a va loan

A ‘bad credit’ is simply just a bad credit rating or credit score. According to Investopedia, “It is a person or a company’s predicted inability to repay a debt in time and full.

The consequences of having bad credit include difficulty getting approved for more credit, difficulty getting approved for a loan, and higher interest rates on debt.

However, receiving a home loan is a common problem for individuals with bad credit or low Fico score. On the bright side, there are programs designed to make it possible. A VA home loan is an example of one of these loan opportunities.

VA Loans Bad Credit – Origin and Purpose

va loan summary

In 1944, the departments of Veteran Affairs Home Loan Program were created to help veterans returning from World War II to get settled by helping them obtain property by helping them rebuild your credit. This program was an attempt to compensate and appreciate the services of American soldiers.

Seventy-five years later, the program still stands but is now better, larger, and open to those still in active service.

Unfortunately, people often mix up the function of a VA home loan program with that of a lender or mortgage company.

A VA home loan is not designed to lend veterans the money to buy a house, but it helps them get the loan despite their credit score or lack thereof. If the veteran is unable to pay the debt due to circumstances, the government bears the financial responsibility.

Without government aid, getting a home is usually difficult for veterans who spent substantial time overseas.

The normal procedures like having good credit, putting a down payment on a house, and even foreclosure were challenges for those that fought for America.

One of the best things about a VA home loan is that it has no limit. Certificate of eligibility coe Although VA home loans were set up to help veterans qualify for a home loan without any hassle, many of the same financial factors are reviewed when applying for the VA loan.

VA Loans Bad Credit – How to Qualify

Qualify VA loan

The VA Home Loan program, like many programs, has procedures and factors that are considered before a veteran is to be qualified. These include:

Stable Income:

This is a key factor that will determine whether you do or do not qualify for a VA loan. The program will only back up your loan if they are assured that your income is able to handle your debt. Twenty four months of consistent employment is considered as proof of a stable income. However, in situations where you don’t have 24 months of stable employment, your future income will be evaluated and used instead.

Payment History:

One of the most important factors considered before you can qualify for a VA home loan is your payment history. The program is more forgiving than a standard lender when considering this criterion, though. The most important thing they want to know is that you will be punctual with each of your monthly payments.

No Outstanding Credit:

If you have an outstanding debt that is long due for payment, and you have not paid it off, this may lead to disqualification. You should have no outstanding payments or any credit with unstable or untimely payments in the past twelve months when you apply for a VA home loan.

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VA Loans Bad Credit – Fixing Credit

Va loan fix credit

It is essential not to forget that the VA home loan program is not meant to loan you money. Only lenders do that. So, you should know that you have to qualify for the loan. With bad credit ratings, this might be a little bit difficult, but not impossible. All you need to do is to make up for your lack of qualifications. There are a few strategic steps you can take to make up for your bad credit rating. These include:

Long-term Employment:

If you have been with the same employer for a long period of time, this will help. Long-term employment shows a stable income, and a stable income means that you are capable of paying the loan back.

Huge Down Payment:

I understand that your inability to afford the house made you opt-in for a loan initially so this may be a difficult option. Putting down a large sum of money as your down payment gives lenders more security when lending to you, and makes them more likely to lend you the VA loan.

Attractive Income:

When your income is evaluated, if it is a sizeable amount, lenders will be more than happy to give you a chance knowing that your income can potentially handle the loan debt payments each month.

Minimal Debt:

If you have a huge debt ‘hanging’ over your account, coupled with a poor credit score, you will be disqualified for any significant loans regardless of your income.

Here are some additional tips that will help you rebuild your credit:

  • A small loan from a private lender
  • Secure credit card
  • Pay in time
  • Do not overdraft your debit card
  • VA loan program

Make sure to stay on top with the accounts you open, so when you are ready to buy your new home credit report agencies have an updated eligibility requirement and will be more likely to approve your loan

VA Loans Bad Credit – Conclusion

If you are a veteran, you may have more options available to you than you think. VA loans bad credit is a trending topic that many are trying to understand. Contact your local VA loan center for more information and details regarding the VA loan application process, be sure to contact the service-connected to disabilities if you have one.

Published April 17, 2019; UPDATED May 16,2019.

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