Insured by the United States Department of Veterans Affairs, a VA loan is a mortgage program specially designed for veterans, military officers, and their surviving spouses. With this, they can get financial aid and buy a home of their choice.
However, like any other home loan program, there is a credit score requirement by the lenders for a VA loan. But you don’t need to worry. The requirements for credit score for VA loan in Houston is not too high. You can get approval even with a low credit score. However, you should avoid these credit mistakes when applying for a VA loan with low credit.
- Applying for new credit
Are you thinking of applying for new credit for a costly purchase before applying for a VA home loan? Though it seems harmless, actually it affects your credit score badly. When you apply for new credit, the lender pulls your credit report, as well as FICO Scores from any or all three major bureaus. As it is a hard inquiry, it can affect your credit scores even only by a few points. When your credit score is already low, it will further lower the score that you will not want. Besides, opening new credit card accounts will cut your average account age in half, which can lower your FICO Scores. So, to be on the safe side, it is better not to apply for new credit.
- Not paying attention to the credit score
One of the common credit mistakes that homebuyers make before applying for a home loan, such as a VA loan, is not checking the credit score. The FICO scores are generated based on your credit reports. So, without checking the scores you could not have an idea about the credit errors if there is any. It would be better for you to check your credit reports for accuracy months before you start your house hunt. It is because, with this, you have plenty of time to dispute any errors you spot and get them fixed. Instead of checking the report from only one U.S. credit bureau, check from the three major U.S. credit bureaus. Even if one of your credit reports contains incorrect information, the impact of the error on your FICO Scores could be major enough to affect the terms of your mortgage. So, you should check from the credit score from the three major U.S. credit bureaus before applying for a VA home loan program.
- Over-using your cards
Like any other mortgage lenders, VA lenders also want to check your debt-to-income ratio. Lenders will check potential borrowers who are revolving a hefty monthly balance on their credit cards. Besides, credit utilization or how much of your available credit you’re using is a big FICO Score factor. If you’re over-utilizing credit accounts then you could be damaging your FICO Scores without even knowing it. So, do not over-utilize it.
Though these mistakes same minimal ones, they can prevent you from getting approval for a VA loan. So, steer clear of these mistakes to ensure approval easily from a VA lender.