Can You Get a VA Loan with Bad Credit?

VA loan with bad credit may look like something not easily obtainable looking at the various stringent rules imposed by VA.  But actual fact is that VA looks more leniently at a veteran applying for VA loan with bad credit than many other government agencies.

What VA Loans Provide

VA loan is the loan of choice even with bad credit for almost all the veterans as it provides:

  • 100% financing and no down payment.
  • No PMIs (Private Mortgage Insurance.)
  • Very competitive and low interest rates.
  • It is easier to qualify for a VA loan even with bad credit.
  • Very lenient repayment guidelines for underwriting the loans to veterans.

Actually private banks, lenders or mortgage companies lend the money to the veterans which the VA insures and covers the losses in case of default.  All the veterans who get normal VA loans can get the same kind of VA loans even if they have bad credit. There are no pre-set credit score standards or any minimum income as per government rules to avail VA loans with bad debt.

Getting VA Loans with Bad Credit

Let us look into eligibility criteria as for getting a VA loan with bad credit.

  • They have to get a certificate of eligibility.
  • Eligible veterans with bad debt should have their present unpaid debt load evaluated and should have all their open credit lines reviewed.
  • The Maximum debt-income ratio to qualify for VA loan is about 41%.
  • You should have a reliable history of making regular payments towards loan payments punctually over the previous year.
  • It will take about 30 days for the loan sanction to take effect.
  • If you are declared bankrupt, VA’s conditions are to be met for loan sanction.
  • If there had been extenuating circumstances especially like prolonged and critical illness or a job loss not attributable to you personally, you can get a loan after one year.
  • In the case of a bankrupt veteran needing a VA loan for the foreclosed home, regular payback to outstanding creditors named in bankruptcy is considered as proactive way of restoring credit and he can apply almost immediately for a VA loan.
  • You should proactively improve your credit recovery.

There are three or so bureaus which keep an account of your present credit after a bankruptcy charge. Recovery of credit after a bankruptcy should be done proactively and quickly. Opening at least two secured credit card accounts after you get a VA loan with bad credit will inform the bureaus of your activity and show a speedier recovery of credit. There are many cards offered online which offer competitive interest rates and quicker credit recovery.

Getting Multiple VA Loans

Actually veterans with VA loans with bad credit can even get a second and even a third loan subsequently; only they will have higher funding fees as compared to the first VA loan.

VA loans are the most economical in that they need no money down from the veteran or his family and also carry a very low interest. They are a boon to the veterans who stand in need of a VA loan – even with bad credit.

Can you get a second VA loan if you defaulted on the first?

If you are trying to get a VA loan, bad credit will not usually be a big issue. Even if you have bad credit, the VA may still be willing to work with you. However, if you have defaulted on a VA loan, the situation might be a little more complex. In some cases, you may be able to qualify for a second VA loan after more than 4 years have passed. However, the VA may not be willing to guarantee the entire loan but only a portion of the loan. In other cases, they might be willing to guarantee the entire loan if everything else appears to be in order.

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