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, buying a home may seem like a herculean task. However, one of the benefits when enlisting in the military is qualifying for a VA or Veteran’s Affairs loan.

If you’re a military member or veteran but worried about your credit history, you might be able to access a VA loan and be able to refinance or buy a home. Additionally, spouses of veterans can also qualify.

This article will enlighten you with the advantages, eligibility requirements, and strategies to improve your chances of approval.

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VA Loans Bad Credit – Bad credit? No Problem!

A person holding a home model

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 scores. 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.

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 Origin and Purpose of  VA Home Loan

A happy military family in front of their new home purchased with a VA loan.

In 1944, the Department of Veteran Affairs Home Loan Program was created to help veterans returning from World War II to get settled by helping them obtain property by helping them rebuild their 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. 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.

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How to Qualify for VA Home Loans with Bad Credit

VA loan papers

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 can handle your debt. Twenty-four months of consistent employment is considered 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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Fixing Bad Credit Score

Va loan credit score

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, 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

Putting a big down payment is hard, especially for someone who is taking out a loan. 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.

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

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

Make sure to stay on top of the accounts you open, so that 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. 


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.

Frequently Asked Questions

How long does it take to improve bad credit for a VA home loan?

The time it takes to improve bad credit for a VA home loan varies depending on individual circumstances and the extent of the credit challenges. Building positive credit habits, such as paying bills on time, reducing debt, and keeping credit utilization low, can yield gradual improvements over several months or years. It’s important to be patient and consistent in your efforts to demonstrate financial responsibility. Working with a credit counselor or financial advisor can provide guidance tailored to your situation and help expedite the credit improvement process.

What documentation do I need to provide for a VA home loan with bad credit?

When applying for a VA home loan with bad credit, you’ll typically need to provide standard documentation such as proof of income, bank statements, tax returns, and employment verification. In addition, you may be required to submit a written explanation of any past credit challenges and provide supporting documentation, such as letters of explanation or proof of extenuating circumstances. Working with a VA lender who specializes in assisting borrowers with bad credit can help ensure you have a clear understanding of the specific documentation requirements for your situation.

How can I improve my chances of approval for a VA home loan with bad credit?

While VA loans are more flexible with credit requirements, it’s still beneficial to improve your chances of approval. Start by reviewing your credit report for any errors or inaccuracies that can be disputed and corrected. Paying bills on time and reducing existing debt can positively impact your credit score over time. Building a solid employment history and maintaining a stable income are also crucial factors. Additionally, saving for a larger down payment can demonstrate your commitment and financial stability to lenders. Finally, seeking assistance from experienced VA loan specialists who can guide you through the process and offer tailored advice is highly recommended.

Published on April 17, 2019; Updated on May 16, 2019; Updated on June 23, 2023.

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