How to Prepare for the Credit Score for VA Loans in Houston in 2022

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Wondering whether a low credit score is possible with a VA loan in Houston? Here’s what to know!

 

 

VA loans are potentially the best mortgage programs for veterans and active-duty service members. The helpful benefits include low-interest rates that keep the monthly mortgage payments down. The Department of Veterans Affairs partially guarantees the loan, and as a result, lenders can offer favorable terms. The private mortgage insurance premium does not add up whereas it is a huge factor for traditional home loans. Conventional borrowers often have to pay an additional $100 for the PMI. Of course, there is no down payment necessary – you do not have to put down 5% or 20% of the loan value. Most families put a 20% down payment for conventional loans.

Now, you can avoid the down payment with a VA loan. Needless to say, the VA loans are a lot different than you could ever guess. The credit score for VA loan in Houston is 550, and it is a lot lower than other conventional loans in the market. So, in this article, we mention the essential things about credit scores for VA loans.

Credit Score for VA Loan in Houston

VA lenders check three credit scores before finalizing your ability to pay off a mortgage. The average one gets to show your ability to pay down the loan. The FICO score ranges between 300 and 500 – the higher scores you have, the better your chances to have low-interest rates. Of course, the VA score guideline depends on the lenders.

Finding Ways to Improve Credit Scores

When you are unable to go through the underwriting process, a few steps to improve FICO scores can widely help. Sure, the credit score is not going to see a significant change within a day – however, a slight change matters a lot. So, the first thing you should do is make payments right on time. Payment history is a huge factor that determines your credit score. Your credit score will gradually move upwards if you make loan payments on time. In case you didn’t know, late payment affects credit scores. For avoiding accidental late payments, you can create an automatic payment plan. Another way to improve FICO scores is to keep up credit card balances.

Credit utilization rate is a critical aspect of your credit score. It is better if your credit utilization rate remains lower than 30%. Borrowers with the best credit scores have their credit utilization rate in a single digit.

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