The National Association of Realtors released a statement this week urging lenders to loosen lending requirements, which the advocacy group says would spur significant home sales and job growth.
That plea comes on the heels of the NAR's monthly survey of more than 3,000 real estate agents. Buried in the press release are a couple of data points that should make military borrowers take notice. Agents who responded to the survey said that:
Why is this important? Mostly because those two credit scores are well above what most VA lenders are looking for in the current lending environment. If your credit score looks dismal, Veterans United's Lighthouse program is a free-of-charge method of helping you through credit issues. With VA loans bad credit doesn't necessarily mean the end of your journey to homeownership.
The VA loan program has flexible credit and underwriting requirements. That doesn't mean anyone who wants a loan can get one. Borrowers have to meet requirements set forth by both the VA and by lenders, and the latter can and almost always do have more stringent requirements than the VA.
For example, there's no credit score requirement to participate in the VA loan guaranty program. The VA wants borrowers to be satisfactory credit risks, without any hard number attached. But lenders, who assume most of the risk with these loans, require applicants to hit or exceed a credit benchmark.
In today's lending environment, most VA approved lenders are looking for a credit score of at least 620.
That's almost 50 points fewer than the average FHA denial and more than 100 points off the 740 score that represented a majority of August purchases.
I know even a 620 credit score can seem like a tough hill to climb. But let this comparison give you some context. VA loans really do represent a big benefit in terms of the qualifying score you need, not to mention the fact that qualified borrowers can purchase a home with no money down.
FHA loans come with a minimum down payment of 3.5 percent. Conventional loans typically require a 5 percent minimum. Both of those loans come with forms of mortgage insurance, which is something VA loans don't have.
If you're falling short of the 620 score needed to satisfy VA lenders, I highly recommend you check out our Lighthouse Program. This is a special segment of Veterans United staffed with credit experts who help veterans and military members for free to develop plans to repair their scores and get on the path to loan prequalification. You can reach a Lighthouse specialist at 888-392-7421.
There's no secret formula or expensive fix when it comes to boosting your credit score. It's often a matter of dedication, hard work and patience.
Just know that you won't have to spend even more time working toward a 670 or 740 or higher.
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