VA Credit Requirements are many times misunderstood, mainly because there are essentially two sets of VA guidelines. There are the guidelines that VA publishes, which are the “official” guidelines, but then there are the lender’s guidelines.
The difference is that all lenders have “overlays,” or additional guidelines above and beyond what VA requires. For example, VA guidelines will state that VA IRRRL refinances do not require and appraisal, but in reality, most lenders do require some form of an appraisal. VA will also state that there is no minimum credit score on California VA Loans, but most lenders have a 620 minimum credit score.
Here is a summary of some of the basic credit requirements for California VA Loans. If you need additional help, we would be honored to give you a no obligation consultation to help you understand if you qualify for a VA loan.
For most VA programs, the minimum credit score is 620. 620 is a slightly below average score, so it does allow some flexibility if you have been late on some payments of have a few collections. However, with a higher credit score, you will be able to obtain a lower interest rates. If you are monitoring your own credit score, please note that a consumer credit score model is different from a lender model, so you will likely pull a higher score than your lender.
If you have had a bankruptcy in your past, you will have to wait for 2 years after discharge (not filing), on a Chapter 7 bankruptcy, and 2 years after filing on a Chapter 13. If you had a mortgage in your bankruptcy, it does count as a foreclosure.
You must wait for 2 years after a foreclosure to be eligible for a California VA Loan. The 2 year period is measured from the Sheriff Sale date, which is the date that the bank sold the home to someone and got it off their books.
Short Sales follow the same rules as foreclosures, and you must wait for 2 years after the sale of the home. The exception is if you were on time at the time of the short sale, in which case you may be eligible to purchase a home immediately after the short sale.
Judgments and Tax Liens must either be paid off, or you must be in a payment plan and be able to provide proof that you have made the past 12 consecutive payments on time. If you have a Federal Tax Lien, you may not be able to qualify until it is paid in full.
Medical collections generally do not have to paid off to qualify, but you will have to provide an explanation of the situation. Non-medical collections in some cases will have to be paid off in order to qualify. The general rule is that any non-medical collections over $1000 will have to be paid.
We would be happy to take a look at your credit and advise you as to whether you can qualify to purchase a home or refinance. We will provide you a free, professional copy of your credit report, and will give you honest advice and straight answers. If you don’t qualify now, we will give you tips on how to improve your credit. Give us a call today!