Credit Score for VA Loan in Houston: Everything Explained Here

Are you aware of the credit score requirement for VA loans in Houston? Read the article now!

Is there really a credit score requirement for VA loans in Houston? This is a common confusion that every borrower faces more or less. There are FICO score rules but the requirements are not designed by lenders. The credit score for VA loan in Houston affects multiple lenders, so it is important to know everything figured out about it.

In this article, we mention things you need to know about the FICO score requirement for VA loans.

Credit Score Review for VA Loans

The credit score report comprises information regarding financial payments and transactions as well as the owed amount. Moreover, the credit report shows whether there are any payments 30 or 90 days late. The report lists all the outstanding collections, judgments, and charge-offs. The report alone can cause rejection of the loan application if an underwriter notices derogatory credit.

FICO company with its complex analysis produces a 3-digit number that forecasts your future as a borrower. The number remains between 300 and 850, and shows the higher is always better. Experian, Transunion, and Equifax are three credit report agencies that follow the FICO model and typically look the same.

Remember the VA does not have minimum credit score requirements fixed. VA lenders make the minimum 550 credit score a part of the loan approval process. However, the approval process varies depending on the loan size.

Applying for a VA Loan with Low FICO Score

VA loan programs are popularly known as low-credit score loans. But this does not mean you will have an easy way with your FICO score lower than 640. Working on credit scores one year before the loan application can help you find the best rates. People who apply with FICO scores under the lender’s credit score requirements will be required to pay a higher rate. In this context, the borrower may have to pay a large down payment and lose the chance of indulging in zero down payment benefit.

However, borrowers putting down a certain percentage of the loan value must know there are benefits. VA lenders allow the utilization of compensating aspects when borrowers apply with low scores. For instance, if you opt for a down payment, you can be eligible for a reduced VA funding fee.

This way, you can save a lot over the life of the mortgage. The principal amount gets lower and the interest rate reduces.