California VA Credit
You’ll be surprised to know that the VA does not set a minimum score for California VA Credit. The lenders, from whom a California Veteran borrows the money for a California VA Loan, however are allowed to set their own minimum credit score (FICO) standards. VA lender guidelines state:
- By law, VA may only guarantee a loan when it is possible to determine that the veteran:
- Is a satisfactory credit risk, and
- Has present and anticipated income that bears a proper relation to the contemplated terms of repayment.
While qualifying for a California VA Loan is not specifically driven by credit score, the lenders are more lenient with active-duty and Veterans than with other borrowers. They are looking for a borrower who has a history over the past 12 months of making on-time payments on their debt obligations: house payments; credit card payments; car payments, etc.
The California VA Credit score lenders generally require to get a VA loan is currently 640+, although there are a few lenders who will allow scores lower than that.
Below are a few areas an underwriter looks into when determining the viability of a borrower for a California VA Loan:
Credit History: One of the beauties of the VA Loan for active-duty and Military Veterans is the leniency in establishing eligible VA credit. There are instances when a person may not have established credit that shows on a credit report…especially those who are younger and haven’t had the opportunity for credit cards, car loans, etc. But with good payment history on rent, phone bills, utilities, and the like, an underwriter can determine whether a California VA borrower is a good credit risk for a loan.
Foreclosure: There is a two year wait to get a VA Loan (FHA requires a 3 year wait; Conventional financing requires a 7 year wait). If the foreclosure was on a previous VA Loan, the available entitlement may be lower meaning a down payment may be required. If this doesn’t make sense, ask a California VA Loan Specialist for an explanation.
Consumer Credit Counseling: For California VA Finance requirements, if a person has entered a counseling program due to past payment problems, they may be eligible to obtain a California VA Loan if they have made the previous 12 month’s payments on time and the counseling agency approves the new credit for the mortgage payment.
Federal Debt; Collection; Judgments: While minor collections do not need to be paid off for California VA Loan approval, judgments must be paid prior to closing (VA Loan Guidelines allow the seller of the home to pay the balance of a judgment on behalf of the California Veteran—called a “concession”, but the expectation of the seller to pay for this lowers his profit on the sale and may mean they would accept another offer over yours). Federal debt obligations must not be delinquent. These include: tax liens, student loans, etc.
Chapter 13: On-time payments for the previous 12 months are required, and the court trustee will need to provide written approval for a California Veteran to take on a new VA Loan. All other obligations on the credit report must have been made on time as well.
Chapter 7: A California Veteran is eligible for a VA Loan 2 years from the discharge date of the borrower and/or the spouse’s BK. All credit obligations must have been made on time since the discharge.
The bottom line: The VA encourages lenders to find ways to grant loans to our active-duty and retired Military Veterans. All things being equal, a California VA Loan is the preferable way to go for a home mortgage, especially for those with thin or challenged credit.