VA Credit Guidelines On AUS-Approval And Manual Underwriting

Many mortgage borrowers are getting conflicting answers about the minimum credit score requirements when trying to qualify for a VA mortgage. Over 75% of our borrowers at Capital Lending Network, Inc. dba CLN Mortgage are folks who could not qualify at other lenders due to their overlays. They get conflicting reports when it comes to the minimum credit score requirements on VA loans. They are often told by the lender that the minimum credit score is 620 FICO. Others are told their minimum credit score requirements are 640 FICO.
The great news is that the Department of Veterans Affairs (VA) has no minimum credit score requirement. This holds true as long as the borrower has an approve/eligible per automated underwriting system findings. Then why are lenders requiring higher credit scores? This is due to lender overlays which we will discuss in the following paragraphs of this article.

VA Guidelines On Credit Scores Down To 500 FICO Versus Down Payment

FHA's minimum credit score requirement is 500 FICO. However, to qualify for an FHA loan with under 580 credit scores and down to 500 FICO, the borrower needs a 10% down payment.

FHA’s minimum credit score requirement is 500 FICO. However, to qualify for an FHA loan with under 580 credit scores and down to 500 FICO, the borrower needs a 10% down payment. Borrowers with at least a 580 credit score or higher can qualify for a 3.5% down payment FHA loan. With VA loans, there is no down payment requirement. This holds true no matter how low the credit scores are. However, the borrower needs to get an approve/eligible per automated underwriting system.

The Great Benefits Of VA Loans Versus Other Mortgage Options

Borrowers who cannot get an approve/eligible per AUS may qualify for VA loans with a manual underwrite. Manual underwriting guidelines apply. Lenders offer VA loans with 100% financing due to the VA loan guarantee by the federal government. VA loans are hands down the best home mortgage program in the United States. Mortgage rates are lower than conventional loans. There is no private mortgage insurance required. The VA Funding Fee be rolled into the loan balance.

VA Guidelines On Credit Scores Down To 500 FICO Versus Lender Overlays

Remember to realize that not all lenders have the same VA lending guidelines on VA mortgages. All lenders need to meet the minimum VA agency mortgage guidelines, However, mortgage companies can have their own lending requirements that surpass the minimum VA agency guidelines For example, the VA does not require a minimum credit score, However, most lenders will require a 620 to 640 credit score requirement on VA loans as part of their lender overlays 
This holds true even though the borrower may meet all other VA agency guidelines and gets automated approval from the AUS Michael Gracz of Capital Lending Network, Inc. is a VA lending expert. Mike has countless borrowers who closed on their VA loans with credit scores down to 500 FICO. Here is what Mike Gracz said about VA mortgages:
A VA home loan is either for a veteran or a soldier currently enlisted. These loans allow for no down payment & no monthly mortgage insurance. These are fantastic loans if you are a veteran. A lot of veterans qualify for a VA loan and do not realize it. Most mortgage companies state you must have at least a 620-660 credit score and high income to qualify for a VA loan. These companies again are using overlays. You can get a VA loan with a 500 credit score.
If you happen to have enough residual income there is a good chance you can qualify up to and maybe above a 60% D/I ratio. In layman’s terms, you can have a lower income and still qualify for a VA loan. When your credit score is below 620 usually you have to do a manual underwrite, which 99% of the mortgage companies do not do, therefore you are turned down. We do both manual & automated underwriting on VA loans.
The key to getting an approve/eligible per automated underwriting system is to have timely payments in the past 12 months. There is no maximum debt to income ratio caps on VA loans. The team at Capital Lending Network, Inc. dba CLN Mortgage has closed many loans for borrowers with credit scores in the 500’s and over 60% debt to income ratios. Residual income is very important when it comes to borrowers with higher debt-to-income ratios and/or lower credit scores. To qualify for a VA Loan with a lender with no lender overlays, please contact us at CLN Mortgage at 262-716-8151 or text us for a faster response.
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VA Credit Score Lender Overlays By Mortgage Lenders

Why Do Many VA Lenders Hav So Many Different VA credit score requirements? Is It True VA Loans Have No Minimum Credit Score Requirements And If So, Why Do Lenders Have Minimum Credit Score Requirements? This is because most lenders have lender overlays on VA loans. In this article, we will cover the following topics:

  • VA agency guidelines versus lender overlays.
  • Qualifying for VA loans with credit scores as low as 500 FICO.
  • The importance of timely payment in the past 12 months.
  • Why does Capital Lending Network, Inc. dba CLN Mortgage approve VA loans when other lenders cannot.

Over 75% of borrowers at CLN Mortgage are folks who have been denied at other lenders. We will show you how we approve borrowers other lenders deny in this article.

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No Minimum Credit Score Requirement on VA Loans

It is true that there are no minimum credit score requirements on VA loans as long as the borrower can get an approve/eligible per automated underwriting system (AUS). There is no maximum debt to income ratio on VA loans as long as the borrower can get an approve/eligible per automated underwriting systeThe key in getting an approve/eligible per automated underwriting system is to make sure the borrower has been timely in the past 12 months on all of their payments. Capital Lending Network, Inc. are experts in manual underwriting. A large percentage of our borrowers at CLN Mortgage are borrowers who need manual underwrite.

What Are Lender Overlays Versus Agency Mortgage Guidelines

The key to getting an approve/eligible per automated underwriting system for borrowers with a high debt-to-income ratio is for the borrower to have high residual income. Having strong VA residual income is key on VA loans with high debt to income ratio. The reason why lenders have certain credit score requirements and/or debt to income ratio caps is that most lenders have lender overlays on VA loans.

What Are Lender Overlays

Lender overlays are lending requirements and guidelines that are above and beyond the minimum VA Guidelines. Capital Lending Network, Inc. dba CLN Mortgage has no lender overlays on VA loans. As long as the borrower can get approve/eligible per the automated underwriting system, Capital Lending Network, Inc. dba CLN Mortgage will approve and close the loan. Over 75% of our borrowers are folks who could not qualify for a mortgage at other lenders due to lender overlays. Since we have no lender overlays, we just go by the minimum agency VA mortgage guidelines with zero lender overlays.

Who Is Eligible For VA Loans

VA Loans is the best owner-occupant residential mortgage program in the U.S. However, borrowers need to be either active or retired members of the U.S. Military with a valid Certificate of Eligibility. Certificate of Eligibility is also referred to as COE. The U.S. Department of Veterans Affairs is the government agency that is in charge of the VA Home Mortgage Guarantee Programs. Lenders can offer 100% financing with interest rates lower than conventional loans to VA borrowers. This is due to the partial loan guarantee by the Department of Veterans Affairs. Capital Lending Network, Inc. dba CLN Mortgage are direct lenders with no overlays on VA Mortgages.

Understanding The Difference Of The VA Loan Requirements By The Department of Veterans Administration Versus Overlays By Lenders

Over 75% of our borrowers at Capital Lending Network, Inc. are folks who come to us due to last-minute mortgage denial or stress during their mortgage process.

Over 75% of our borrowers at Capital Lending Network, Inc. are folks who come to us due to last-minute mortgage denial or stress during their mortgage process. Capital Lending Network, Inc. is a five-star mortgage company licensed in multiple states with no lender overlays on VA Loans.

Overlays are lending requirements that are above and beyond those of VA Credit Guidelines. For example, VA does not require a minimum credit score requirement. However, most lenders have minimum credit score requirements of 620 to 640. This minimum credit score requirement by lenders is called lender overlays. CLN Mortgage has no minimum credit score requirements. Borrowers can qualify for VA loans with no credit requirements at Capital Lending Network, Inc. 

VA Loan Requirements For  Bad Credit And Credit Scores Down To 500 FICO

Many borrowers are often confused about the minimum credit scores required on VA Loans. They often consult with lenders about qualifying for VA Loan With 500 FICO. However, they are often told they need a 620 or 640 credit score. Borrowers do need an approve/eligible per automated underwriting system findings to qualify for VA Mortgage With 500 FICO. They often are surprised when they contact us that they can qualify for VA Home Loan With 500 FICO.

How Strict Is It To Qualify For VA Home Mortgage With 500 FICO

VA Loans are one of the easiest loan programs to qualify for. VA Home Loans was created and launched in 1944 by the Department of Veterans Affairs.  The purpose of the creation of VA loans was to reward and help our men and women of the U.S. Armed Services to purchase homes after they got back from World War II. VA has helped many million soldiers buy and finance their home loans.

VA Loans Have Easier Guidelines On Bad Credit With Low Credit Scores

Besides offering 100% financing, the Department of Veterans Affairs realized that soldiers did not have good credit while being deployed versus their civilian counterparts. It is difficult to pay your bills on time while being deployed to serve your country overseas. The agency created much lax underwriting guidelines than other loan programs. To qualify for VA Loans after foreclosure, short sale, deed in lieu of foreclosure has a two-year waiting period versus FHA’s three-year waiting period.

VA Loans Versus FHA Loans: A Comparison Of The Two Government-Backed Loans

VA does not have a minimum credit score requirement whereas FHA requires 580 credit scores. VA does not have a maximum debt to income ratio requirement when other loan programs do.

VA does not have a minimum credit score requirement whereas FHA requires 580 credit scores. VA does not have a maximum debt to income ratio requirement when other loan programs do. Unfortunately, most lenders do not offer VA loans for bad credit home buyers with credit scores down to 500 FICO. The great news is CLN Mortgage offers VA loans with 500 FICO as long as borrowers can get an automated underwriting system approval or meet the minimum manual underwriting guidelines.

The Key To Getting AUS Approval

The Automated Underwriting System is a sophisticated automated system that renders a decision within seconds.  Borrowers can qualify for VA Home Mortgage With 500 FICO but need an AUS Approval.

Automated Underwriting System will analyze the following prior to rendering its decision:

  • Credit Scores
  • Overall Payment History
  • Late payments 
  • Late payments in the past 12 months
  • Available credit on revolving credit accounts
  • Down payment, if any
  • Reserves if any
  • Residual Income
  • Credit inquiries

The AUS determines the VA Guidelines within seconds and renders an approve/eligible per automated underwriting system if the borrowers meet the agency guidelines.

The Mortgage Process On VA Loans With 500 FICO

The way our system at CLN works is we just go off by automated underwriting system findings. We do not have any overlays. This holds true as long as borrowers get an approve/eligible per AUS. The borrowers need to meet the conditions. As long as the borrowers can meet the conditions of the AUS, they can close on the VA Home Mortgage With 500 FICO. 

Conditional Mortgage Approval From Mortgage Underwriter

Examples of conditions may be the following:

  • Requiring verification of employment
  • Conditioning verification of rent when AUS does not require it
  • Certificate of Eligibility
  • 2 years tax returns and W2s
  • And other documents

Borrowers who get a refer/eligible from the automated underwriting system, lenders can downgrade the file to manual underwriting. VA and FHA allow for manual underwriting. Borrowers who need to qualify for VA Home Mortgage With 500 FICO, please contact us at CLN Mortgage at 800-900-8569.  The Team at Capital Lending Network, Inc. is available 7 days a week, evenings, weekends, and holidays. Capital Lending Network, Inc. has no lender overlays on government and conventional loans. We just go off the automated findings of the automated underwriting system.

Get a custom VA mortgage quote now. 


Peter has 7+ years of experience in residential lending. He is a licensed Realtor in the Chicagoland area.

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