Being a government-backed home loan program, a VA loan brings some advantages to veterans, military officers, and surviving spouses. And one of the most crucial of them is lenient credit requirements. While conventional home loans need an excellent credit score to get approval, you can get approval for a VA loan despite having a low credit score.
But there is no fixed credit score for VA loan in Houston and the credit requirements can vary from lenders to lenders. And the higher the score the better the possibility to get loan approval. So, you should try to come with a higher credit score and avoid these mistakes that can affect your score –
- Applying for new credit
Applying for new credit before applying for a home loan program may seem safe; however, it actually affects your credit score drastically. When you apply for credit, the lender will pull your credit report and FICO Scores from any or all three major bureaus. It is considered a hard inquiry. And hard inquiries generally affect your credit scores even only by a few points.
If your credit score is already low, it will further affect the score. Besides, opening new credit card accounts will cut your average account age in half, which can lower your FICO Scores. So, if you don’t want to lower your score, don’t apply for new credit.
- Not checking your credit
A common credit mistake that homebuyers make is not paying attention to credit and not checking the credit score. Depending on your credit reports, your FICO scores are generated. That’s why; you should check your credit reports for any errors that could be hurting your scores. It would be better to check your credit reports for accuracy months before you start your house hunt 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 has incorrect information, the impact of the error on your FICO Scores could be major enough to affect the terms of your mortgage. So, check the report and proceed accordingly.
- Over-using the cards that you already have
Before approving your VA home loan application, mortgage lenders evaluate your debt-to-income ratio. It is the percentage of your gross monthly income that goes toward repaying debt. It includes outstanding credit card balances. Mortgage 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-using credit accounts then you could be affecting your FICO Scores without even knowing it. So, restrict yourself from doing this mistake.
So, applying for new credits, not checking your credit reports from the three major credit bureaus, and over-using your existing cards are some of the major mistakes that you should avoid to ensure VA loan approval.