Most people know VA loans offer unique advantages—like no down payment or private mortgage insurance (PMI). But the official guidelines actually leave room for more flexibility than many lenders advertise. Let’s sort through the confusion, highlight your real options, and explore how you can lock down a VA loan in 2025 (or beyond)—even if your credit score looks less than stellar.

Why Listen to Me?

I’m not just reciting a few lines from the Handbook. I’ve seen real borrowers who’ve been told “You need a 620 credit score!” only to be approved at 580 (or even lower) by a more flexible lender. The VA itself doesn’t impose a FICO cutoff—that’s lender policy, not law. Below, I’ll cite sections from VA Pamphlet 26-7 to show you where the “official” info comes from and how you can leverage the real guidelines to your advantage.

1. Why VA Loans Are a Big Deal

• Zero Down Payment
  The VA doesn’t require a down payment if you have full entitlement. That means you can buy a home without saving up 3–5% (or 20%!) of the purchase price.
  • Source: VA Pamphlet 26-7, Chapter 3, Section 5 (Entitlement / Down Payment Guidance)
• No PMI
  On conventional loans with less than 20% down, you typically pay monthly private mortgage insurance. With a VA mortgage, you skip that expense entirely—immediately lowering your monthly costs.
• Competitive Interest Rates
  Because the VA guarantees a portion of the loan, lenders can offer rates generally lower than similar conventional mortgages—sometimes by as much as 0.5% or more.
• Flexible Credit & No Hard FICO Minimum
  Contrary to the big rumor, the VA doesn’t set a strict cutoff. Yes, many lenders say “We need 620.” But that’s their overlay. By shopping around, you may find a broker or lender who can work with 600, 580, or even no traditional credit if you have solid alternative payment histories.
  • Source: VA Pamphlet 26-7, Chapter 4, Section 7: Credit Standards

2. Minimum Service Requirements

To keep it straightforward:

1. Veterans & Active-Duty Service Members
   • At least 90 consecutive days of active service in wartime
   • OR 181 days in peacetime
2. National Guard & Reserve
   • Six years of service, typically, or at least 90 days of active-duty mobilization
3. Surviving Spouses
   • Must be unremarried (with a few exceptions)
   • Veteran’s death must be service-related or in the line of duty

If you’re unsure, the simplest route is: request your Certificate of Eligibility (COE) (explained below), which spells out exactly how much “entitlement” you have.

3. The True Credit & Underwriting Perspective

A) Why “No Minimum Score” Really Means “Your Story Matters”

• VA Handbook states: “The veteran’s credit must be evaluated on the basis of the entire credit record, not merely on isolated instances of unsatisfactory credit.” In short, context matters. If you had a late payment four months ago due to a medical emergency or a deployment shuffle, be prepared to explain that—and you can still get approved.
• Some lenders want a numeric cutoff (580, 600, 620) for simplicity, but that’s them, not the VA. If you’re hearing a “sorry, no,” you might just need to find a different lender or broker who can place you with a more flexible investor.

B) Late Payments in the Past 12 Months

• Underwriters look at your last 12-month payment history to see if there’s a pattern of risk. One or two late payments may be OK if you can prove they’re outliers (lost job, sudden medical bills).
• The question is always: “Has the issue been resolved?” If you have a stable income and have resumed timely payments, you stand a much better chance.

C) Debt-to-Income (DTI) vs. Residual Income

• The VA suggests keeping DTI under 41%, but again, it’s not an ironclad rule. If your DTI is at 43% or even 50%, you might still qualify if your “residual income” (the money left after major bills) is high enough.
  • Residual Income guidelines are found in VA Pamphlet 26-7, Chapter 4, Section 9. They vary by region and household size.
• This means a family of four living in a low-cost area might be fine at a higher DTI than a single borrower living in an expensive urban setting.

4. Certificate of Eligibility (COE)

How to Get It:

1. VA eBenefits Portal: If you’re tech-savvy, you can apply online.
2. Through Your Lender: Let them request it electronically—often the easiest route.
3. By Mail (VA Form 26-1880): Old-school, but if you prefer a paper trail, go for it.

Pro Tip: If you’re active duty, you’ll need a Statement of Service from your command. That letter confirms your rank, start date, and (if applicable) your expected separation date.

5. Entitlement & Using VA Loans More Than Once

Full vs. Partial Entitlement

• You typically get “full entitlement” the first time you use a VA loan. This means you can finance up to the county loan limit (often no official limit nowadays) with no down payment.
• If you still own a home financed by VA, you might have partial entitlement left. That can affect how large a zero-down loan you can get next time—unless you restore it (see below).

Restoration Options

1. Sell & Pay Off the VA Loan
   • Once your old loan is fully paid, you can restore entitlement for a new purchase.
2. One-Time Restoration Without Selling
   • If you paid off a VA loan but kept the home (say, you refinanced into a conventional loan), you can do a one-time restoration, but only once.

6. What About the VA Funding Fee?

• The VA Funding Fee helps keep the program running since there’s no monthly PMI.
• Fees vary based on down payment and whether you’ve used your VA benefits before.
  • First-time use, zero down: Around 2.15% (as of the 2023–2024 schedule; it may adjust slightly by 2025).
  • Subsequent use, zero down: Around 3.3%.
• Exemptions: Veterans with service-connected disabilities (often 10% or more) may be exempt from the fee. Always ask your lender to check the VA’s system or reference your rating.

7. Step-by-Step VA Loan Process (With Real Commentary)

1. Pre-Qualification:
   • Sit down with a lender or broker who understands VA guidelines (especially if your credit is iffy). They’ll peek at your finances, debts, and talk about your homebuying goals.
2. COE Check & Document Gathering:
   • Make sure you have your DD-214 (if you’re separated) or a Statement of Service (if active duty).
   • Lenders will want your last couple of pay stubs, W-2s, and possibly tax returns if you’re self-employed.
3. House Hunting + Realtor:
   • Look for a real estate agent who knows the VA’s Minimum Property Requirements (MPRs). Some older homes or fixers might require additional repairs to pass a VA appraisal.
4. Offer & VA Appraisal:
   • Insert a VA “escape” clause in your purchase contract to protect you if the home doesn’t appraise high enough.
   • The appraiser checks value and ensures the house is safe, sound, and sanitary (per the MPR guidelines in VA Pamphlet 26-7, Chapter 12).
5. Underwriting & Conditions:
   • Underwriting reviews your credit, income, and the appraisal. If everything checks out, you’ll get a “clear to close.”
   • If the underwriter asks for explanations on late payments, provide them promptly with supporting docs.
6. Closing:
   • Sign your final loan documents.
   • Pay any closing costs or the VA funding fee (unless you’re exempt).
   • Congratulations, you’ve got the keys!

8. Save Even More with reAlpha

Even though VA loans slash your upfront costs, you can still pay a chunk in real estate commissions if you’re not careful. That’s where reAlpha can come in, helping you potentially skip the standard 3% buyer’s agent commission. Over a $400,000 home, that’s a $12,000 difference—money you might want to use for furniture, upgrades, or your emergency fund.

FAQs

1. I heard I need a 620 credit score for a VA loan. True or False?

   • False. The VA itself doesn’t set a minimum (see VA Pamphlet 26-7, Chapter 4, Section 7). Some lenders want 620, others 580, others none. Shop around.

2. What if I had a late payment six months ago?

   • Explain it! Lenders want to see you’ve recovered from a temporary setback. If the rest of your history is solid, you may still be fine.

3. Are there income limits for VA loans?

   • No. The VA doesn’t impose income caps. They do look at DTI and residual income to ensure you can afford your mortgage plus daily living costs.

4. Do I need money for closing costs?

   • Yes, unless you negotiate seller concessions or use lender credits. A VA loan covers the down payment (0%) but not all the closing fees.

5. How many times can I use my VA loan benefit?

   • Potentially multiple times, as long as you restore your entitlement each time (by selling or doing a one-time restoration). You can even own more than one VA-financed property simultaneously in rare cases, provided you have enough remaining entitlement and plan to occupy the second home.

Final Thoughts

A VA loan isn’t just a “nice option” for those who served—it’s often the best mortgage deal out there. The big “secret” is that a lot of the “rules” you hear about credit scores and income are simply lender overlays—not VA law. By finding a lender or broker who respects the official VA guidelines, you can secure a loan even if your credit is below 600, or if you’ve got some explaining to do about a missed payment or two.

Remember:

• The VA wants to say “yes” if your finances are stable and you can demonstrate the ability to repay.
• Don’t let a single lender’s “no” or “620 requirement” kill your dream.
• Explore commission-free buying with reAlpha to save even more.

If you’d like a deeper dive or one-on-one guidance, reach out to Be My Neighbor Mortgage, LLC (NMLS #1743790)—we’re here to help you navigate all the nuances so you can harness your well-deserved VA home loan benefits to the fullest.

Disclaimer:
Be My Neighbor Mortgage, LLC (NMLS #1743790) | Equal Housing Lender. This document is for educational purposes and not a commitment to lend. Loan approval subject to credit and underwriting guidelines. VA guidelines subject to change—always confirm the latest info with your lender or the VA Lender’s Handbook.