The credit score is the primary eligibility requirement that defines the loan approval. Here’s all you need to know about credit score for VA loan n Aurora & the others.
A credit score also known as FICO is a unit of measuring a borrower’s creditworthiness. It is an assessment of whether a person taking out the loan is capable of paying it back. The credit score scale ranges between 300 and 850. If the borrowers’ FICO is higher, then that makes them more eligible in the eyes of the lender. A credit score is checked by all mortgage institutions; from banks to finance brokers and private mortgage lenders. Even in the case of government-backed loans, you need to have an appropriate credit score for a VA loan in Aurora or other similar mortgage products like FHA loans and USDA loans.
How is the Credit Score Assessed?
The credit score or FICO is an assessment of the borrower’s credit history, where the following factors are taken into consideration;
- Total number of open accounts;
- The total level of borrower’s debts;
- Length of credit history;
- Types of credit;
- Repayment history of the borrower, along with other financial factors.
The credit score also determines how much down payment you would have to put in and your mortgage rate. If your credit score is less then you will need to pay a higher mortgage rate and a significantly larger sum as a down payment. However, the great thing about FICO is that it is quite dynamic, and hence can be improved through some appropriate financial practices.
How does the FICO work?
Here’s a list of FICO scores from poor to good;
- 800-850: Excellent
- 740-799: Very good
- 670-739: Good
- 580-669: Fair
- 300-579: Low or Poor
If you have anything between very good and excellent, getting a loan becomes fairly easy with traditional institutions like banks. With a lower FICO, you can apply to mortgage brokers, private mortgage lenders, or apply for government-backed loans like the FHA and VA.
While FHA is open for all American citizens, VA is reserved for only active service persons, veterans, and the surviving spouses of the veterans. FHA has the lowest credit score bar going to 500. It is one of the most flexible loan programs facilitated by the Federal government. VA on the other hand requires a credit score of 620, but a lender might negotiate terms with an even lower credit score.
The thing about applying for mortgages with low credit scores for VA loans in Aurora or FHA loans is that you need a reliable partner by your side. You need a reputable mortgage lender or broker who would streamline the process and help you get approval for the loan.
AUTHOR BIO: Joan Gallardo is a Senior Loan Officer with more than 18 years of experience, writing about credit scores for VA loans in Aurora along with other mortgages.
