For former military personnel, adjusting to civilian life can be quite a challenge. It's common to see those who have left the military, either because their service ended, they suffered from a disability, or simply decided to retire to fight. But when buying a home, the availability of VA home loans with poor credit means they have a financing option available to them.
The military occupies a special place in the lending industry, with a variety of incentives offered to current and former members seeking loan funds for any reason. However, securing mortgage approval from the VA depends on more than just membership.
So, what are the criteria needed to get approved for a VA home loan? What can be done to increase your chances, and where to secure them? Here are some factors that answer these questions.
Qualifying for VA financing
Those who qualify for VA funding are former military members. But that doesn't mean any former member will get the green light. Securing a VA loan with a bad credit score depends on meeting 3 main conditions.
Since those seeking mortgage approval from the VA often have incomes unrelated to the military, there is a possibility that they may have had some bad financial experiences. The VA would like to be sure that they do not carry a great deal of financial risk.
According to this, applicants must not have defaulted on a loan in the previous year, must not have filed for bankruptcy within the last 2 years, and must demonstrate gainful employment. Once these criteria are met, a VA loan is in sight.
Other considerations
The definition of ex-military is not as clear-cut as it seems, as those who are ineligible to serve due to a disability are included in the group – at least by the VA. As a result, currently disabled individuals or those receiving benefits may apply for a VA home loan with a poor credit score.
As with any other loan, taking steps to improve your credit score (even slightly) can make a big difference in your chances of getting mortgage approval from the VA. The best way to do this is to pay off some existing debt or at least be up to date on credit card and other bills. It may be worth taking out a few small personal loans to help manage individual debts.
The benefit of finding a VA loan is that with each debt paid off, credit scores increase and debt-to-income ratios improve. Ratio is the critical factor in any credit application. If you do it right, approval is almost guaranteed.
Where to get a VA home loan
Despite the title of the loan product, a VA home loan is not actually made by the VA. They only offer their support to the applicant, while the mortgage provider actually provides the financing. For this reason, it is necessary to find a suitable online lender to get the best terms possible.
However, due to the willingness of the VA to sponsor the applicant, very good conditions can be secured, not least because of the lower interest rates. But getting a VA loan with poor credit usually means no down payment is required, and the VA also guarantees 25% of the mortgage.
With reduced risk, lenders are happy to grant the mortgage. Still, look out for certified VA construction loan providers. These are trusted VA partners that reduce the risk of being taken advantage of and offer a greater likelihood of mortgage approval by the VA.