Can a Veteran With a Low Credit Score Be Approved for a VA Home Loan

By Kristine Tucker

A government-sponsored Veterans Affairs home loan offers military veterans mortgage benefits that are not available with conventional financing. A VA home loan does not require a minimum down payment. Approval for a VA loan does not require a good credit score, nor does it necessarily affect the interest rate on the mortgage. A veteran with a low credit score is eligible to receive a VA loan as long as he qualifies for the mortgage.

A veteran's credit score does not determine her eligibility or approval for a VA loan. Most conventional loans require a minimum of a 580 credit score to qualify for a mortgage, but a VA loan does not require a minimum score. VA loan approval does require a clear 12-month credit history with no late or default payments of any kind.

A veteran's credit score does not influence his available interest rate. All VA lenders require 2.15 percent (or 2.15 points) to be paid as a funding fee on a home loan. This fee must be paid out of pocket and is not paid by the seller as part of the closing costs. It is possible for a veteran to roll the funding fee into the loan amount. If a veteran chooses to pay the points in cash, his interest rate is reduced.

If a veteran has a low credit score due to bankruptcy, she must meet eligibility requirements. According to the Veteran Loan Center, a veteran must wait one year after Chapter 13 bankruptcy and two years after Chapter 7 bankruptcy to qualify for a VA loan. During the waiting period, a veteran cannot have any late or delinquent payments to any vendors.

A veteran's debt-to-income ratio partially determines his eligibility for a VA mortgage. According to VA Loans, an applicant's debt-to-income ratio must be below 42 percent to qualify for a VA home loan. A veteran's debt ratio is more significant that his credit score when seeking approval for a VA loan.

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