military family curious if they can use VA loan again

VA Loan with Bad Credit

Securing a VA home loan with a lower credit score might seem daunting, but it’s not impossible. Understanding how lenders view lower credit scores, what additional requirements might be imposed, and how to find lenders sympathetic to your situation can make the journey smoother and more successful.

Here’s how to navigate the VA loan approval process if your credit score isn’t as high as you’d like it to be.

How Lenders Might Handle Applications with Lower Credit Scores

Lenders are primarily concerned with risk.

A lower credit score suggests a higher risk of default, but VA loans come with a government-backed guarantee, which mitigates some of this risk for lenders. However, each lender has its own policies and thresholds for credit scores, and some may be more willing to work with lower scores than others.

In these cases, lenders might:

  • Require a higher interest rate: To compensate for the perceived higher risk, lenders might offer loans at higher interest rates to applicants with bad credit scores.
  • Request a larger down payment: While VA loans typically do not require a down payment, lenders might ask for one from borrowers with lower credit scores as an additional security measure.
  • Apply manual underwriting: Lenders might choose to manually review your application instead of relying on automated underwriting systems. This allows them to consider the full context of your financial situation, including factors like income stability and the reason behind a low credit score.
Read more about the va loan credit requirements

VA loan credit score requirements

Possible Additional Requirements or Scrutiny

If your credit score is on the lower end, be prepared for additional scrutiny or requirements, such as:

  • Proof of stable income: Lenders may require more extensive proof of stable income to ensure you can meet monthly mortgage payments.
  • Explanation letters: You might be asked to provide letters explaining any adverse items on your credit report, such as late payments or collections.
  • Lower debt-to-income (DTI) ratio: A lower DTI ratio can help offset concerns about a lower credit score. Lenders may require your DTI to be lower than their standard requirements to qualify.

Tips for Finding VA Loan-Friendly Lenders who will accept bad credit scores


Look for lenders that specialize in VA loans or advertise their willingness to work with veterans and military members with lower credit scores.

Explore online lenders

Some online lenders are more equipped to handle non-traditional credit profiles and might offer more favorable terms for those with lower credit scores.

Talk to a realtor for a referral

Realtors often work closely with mortgage loan officers who are experienced in helping clients with diverse financial situations, including those with lower credit scores. A seasoned realtor can connect you with loan officers who have a track record of successfully navigating VA loan approvals for clients with credit challenges. Their insight and connections can be invaluable in finding a lender that’s not just VA loan-friendly but also understanding and capable of guiding you through the application process with a lower credit score.

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