Can you get a VA loan with bad credit?

Yes, you can get a VA loan with bad credit.  

The goal of the Department of Veteran Affairs (VA) is to make homeownership accessible to current and former military service members and surviving spouses. VA loans are insured by the government but issued by private lenders like banks and mortgage companies. 

VA loans are a great resource for potential homeowners whose credit scores are not as high as they would like. One thing to remember is that to qualify for a VA loan, you will have to meet the requirements set by both the VA and your lender. 

To find out if you qualify for a VA loan with your current credit score, talk with a trusted lender today. 

There are two sources for credit scores: Equifax, Experian and Transunion. Most lenders tend to look at FICO scores when reviewing applications, which are rated on a range of 300-850. So, let’s break down the FICO credit score range to help you see where you stand. 

• Great: 800-850 

• Very good: 740-799 

• Good: 670-739 

• Fair: 580-669 

• Poor: 300-579 

While the VA doesn’t set a minimum credit score for loans, the lender you choose will require one. At Rate, all mortgage applications are subject to credit approval.

Yes, you can refinance a VA loan even with bad credit. Two VA loan refinancing options are: VA streamline and VA cash-out refinance*. 

A VA Interest Rate Reduction Refinance Loan (IRRRL) allows borrowers to refinance their VA home loan into a new VA loan with lower interest rates. It is also called a VA streamline refinance because this refinance typically has a quicker process and less paperwork than other options. 

This refinance can also let you switch your VA home loan from adjustable interest rates to fixed interest rates. While credit score requirements for this loan are similar to a standard VA loan, some lenders might consider a score of 580. 

Another refinancing option for your loan is a VA cash-out refinance, which allows you to access the equity you’ve built up in your home. Borrowers can use a VA cash-out refinance on existing VA home loans. 

A cash-out refinance isn’t a second mortgage but will give you a larger VA-backed mortgage with you receiving the difference in cash upon closing. This new loan will come with new terms and interest rates. Most lenders will look for a credit score of 620 for this refinance, but some lenders might be willing to consider a 580 credit score. 

Before you apply for a VA loan, there are a few other requirements you will have to meet on top of the minimum credit score.  

For a VA loan, you will need to have a maximum debt-to-income (DTI) ratio of 45% and will need to provide a VA Certificate of Eligibility (COE). A COE tells lenders that the VA confirms you meet their requirements for a VA loan. Unlike many other loans, VA loans have down payment options as low as 0%.  

Once you have met these requirements, you are ready to start an application for your VA home loan. 

If your VA loan was denied, the first thing you will want to do is find out why it was denied. From there, you can evaluate your options. 

If you weren’t able to get a COE but are looking for more lenient requirements, you could consider other government-backed home loans like FHA or USDA loans.  

An FHA loan has lower credit score minimums if you don’t meet the VA’s credit requirements. FHA loans also allow a higher DTI ratio, but FHA loans do require a down payment. If you are looking for a 0% down payment option within eligible areas, you might qualify for a USDA loan. 

If you aren’t looking to buy a home right away and still hope for a VA loan, the best thing you can do is work on your credit score before starting your application. Building up your credit score can help you qualify for a VA loan and potentially get you better loan terms. 

To find out if you meet the qualifications for a VA loan and to start the application, connect with a professional lender today! 

_{Applicant subject to credit and underwriting approval. Not all applicants will be approved for financing. Receipt of application does not represent an approval for financing or interest rate guarantee. Refinancing your mortgage may increase costs over the term of your loan. Restrictions may apply.} 

_{Rate is a private corporation organized under the laws of the State of Delaware. It has no affiliation with the US Department of Housing and Urban Development, the US Department of Veterans Affairs, the Nevada Department of Veterans Services, the US Department of Agriculture, or any other government agency. No compensation can be received for advising or assisting another person with a matter relating to veterans’ benefits except as authorized under Title 38 of the United States Code.} 

_{* Using funds from a Cash-out Refinance to consolidate debt may result in the debt taking longer to pay off as it will be combined with borrower’s mortgage principle amount and will be paid off over the full loan term. VA Cash-out Refinance not available in Texas. Rate has no affiliation with the US Department of Veterans Affairs. Contact Rate for more information.}