If I Have Bad Credit Can I Get a VA Loan

By Luke Arthur

When you have served in the military, you can receive several benefits, such as the ability to get a loan through the Veterans Administration. If you have bad credit, you may fear that you will not be able to qualify for a VA loan. However, with this kind of loan, you may be able to qualify even if your credit is not the best.

If you are interested in qualifying for a VA loan, you do not have to meet any specific credit score requirements. Each lender has its own requirements for the minimum credit score that it will work with. As a general guideline, if you have a credit score of 570 or higher, you could qualify for a VA loan. With most mortgage programs, your credit score must be much higher than this to qualify for a loan. This allows those who have had credit trouble in the past to qualify for a loan.

When you apply for a mortgage, lenders will look at your debt-to-income ratio to determine if you are eligible for a loan. With most traditional loan programs, you must have a debt-to-income ratio that is lower than 36 percent of your pre-tax income. This includes all forms of debt other than your mortgage payment. With the VA loan program, you can have a debt-to-income ratio of 41 percent and still qualify for a loan. This allows those with a little more debt on their record to still qualify for a loan.

If you have filed for bankruptcy, you may think you cannot qualify for a mortgage of any kind. While this may be true with a regular mortgage for several years after filing, the VA allows consumers to apply for a mortgage much sooner. If you filed for Chapter 7 bankruptcy, you have to wait two years before you can qualify for a VA mortgage. If you file for Chapter 13 bankruptcy, you only have to wait one year before you can apply for a loan.

The reason that lenders are willing to lend to individuals in these situations is because of the guarantee that is provided by the Veterans Administration. With these types of loans, the VA stands behind them and guarantees them for the lender. If the homeowner defaults on the loan, the VA will pay back a certain amount of it to the lender. This lowers the amount of risk involved for the lender and makes it a much more attractive deal for them.

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