Being an active or retired member of the military, you can enjoy a lot of things, and one of them is when you plan to buy a house. Wondering how? Well, even after bankruptcy, you can buy a home with a VA loan. Supported by the Department of Veterans Affairs (VA), VA home loans help active and retired military personnel to fulfill their dreams of home-ownership. And as these loans are backed by the VA, these loans are easier to obtain than conventional home loans and are the right choice for many veterans who may not qualify for other loan programs.
And the best thing is that you can get the loan program even if your credit score is low. There are several lenders who offer the best VA loans for bad credit. However, before you opt for any of the lenders and apply for a VA, it is important to know certain things about VA loans. Here we have put together a few things that you must know about a VA loan for bad credit.
VA loans are not issued by Veterans Affairs
One of the most important things that you have to understand about VA loans is that they are not issued by the VA itself. Instead, the VA guarantees a large portion of the loan to give the security to the lender that the loan will be repaid even if the borrower fails to repay the loan himself or herself. And so, you have to opt for a lender to apply for a VA loan with bad credit. One of the first things that the lender will request you is your Certificate of Eligibility (EOC) to know that you are eligible for a VA-backed home loan program. Once you submit the document, the lender will move to the next stage.
These loans have no minimum credit score
Unlike conventional loan programs, a VA loan comes with two major benefits. The first is that a VA-backed loan program does not require a down payment for homes priced at up to $417,000 in most of the areas. This can make it easier to get into a home loan without the need to save up thousands for a down payment. The second advantage is that you don’t need to meet any minimum credit requirement for the loan. But as the loan is provided by mortgage lenders, you have to fulfill the individual need of the lender. So, if your credit score is low and a lender denies to approve the loan, you can opt for another one who asks a minimal credit score and get your loan approved.
The loans backed by the VA can be used for refinancing
A lesser-known use for VA-backed home loans with bad credit is to refinance an existing loan into a new VA loan program. The VA supports two main types of refinancing options. One with a current VA loan who wants to lower his interest rate or reduce the length of their loan can apply for an Interest Rate Reduction Refinance Loan (IRRRL), also known as a VA Streamline Refinance loan. The other type of VA refinance loan is termed as a Cash-Out Refinance Loan that one can use for home improvements, paying off debt or other financial needs.
As you are now familiar with some of the important things about VA loans with bad credit, without waiting any more, opt for a reputable mortgage lender and apply for a VA loan to buy a dream home.
Author Bio: Joan Gallardo, a Senior Loan Officer, with 20+ years of experience, here writes on 2 questions to ask the best mortgage lender in Houston when you are about to choose one of the first time home buyer programs in Houston.