If you’re interested in applying for a VA refinance, but your credit isn’t ideal, you have many options. Unlike conventional mortgages, VA loans do not require down payments. However, you may still be required to pay a “funding fee” to protect the VA’s interest in the event that you don’t make your payments.
While there are no minimum credit score requirements for a VA loan, you should have a minimum score of 640. In some cases, lenders will require a higher score to qualify. But you can improve your score and increase your chances of being approved for a VA refinance. You can also take steps to fix mistakes on your credit report that may have negatively affected your credit score.
The most obvious way to improve your credit score is to pay down your bills on time. Lenders will pay attention to your credit utilization ratio (your total debt as a percentage of your total credit limit). Paying down your cards and other credit balances can improve your credit utilization ratio and help you increase your credit score. It’s important to keep your credit utilization ratio low, though, because it affects your overall credit score.
One of the biggest benefits of applying for a VA refinance is the fact that you don’t have to pay private mortgage insurance. This makes it easier for people with bad credit to apply for a VA refinance. Additionally, lenders have lenient guidelines. There is no minimum down payment, and you can even pay 5% of the cost of your new mortgage to start out.
When you apply for a VA refinance, you’ll need to get a Certificate of Eligibility. You can get this through the VA’s eBenefits Portal. Your VA lender will then review your entire loan profile to determine your eligibility. They’ll look at your past two years of payment history, including any foreclosures, bankruptcy, or other negative events.
Another way to improve your credit score is to bring cash into the transaction. Taking out a secured line of credit and using it regularly will help you to build credit. Bringing cash into the transaction will make it appear less risky to the lender.
In addition to taking out a secured line of credit, you can pay off high-interest credit accounts. Once you have a solid credit history and are able to establish a solid employment history, you should be in good shape for a VA loan.
VA loan lenders will often look at other factors as well when approving your VA loan. For example, they’ll take your rent history into account. Also, if you’ve had a late payment in the past 12 months, you might be declined. On the other hand, if you’ve made on-time monthly payments as part of a repayment arrangement, a VA lender might give you a second chance.
You can also improve your VA refinance by paying down your credit card balances. You can do this by lowering your credit card balances to 25% of your credit limit. Keep in mind that you can only have one credit card with a balance of more than $10,000. By reducing your debt utilization ratio to 25% or lower, you will be boosting your credit score.