Best VA Loans for Bad Credit in 2020

One of the great perks about serving in the military or having served is the ability to use the Veterans Assistance loan. VA loans give you the ability to get into a house with no money down and no private mortgage insurance. But if you have bad credit, you may be concerned if you can still take advantage. Luckily, bad credit VA loans do exist through certain lenders.

In this article

    Current VA mortgage rates

    According to Bankrate’s latest survey of the nation’s largest mortgage lenders, these are the current refinance average rates for a 30-year, 15-year fixed and 5/1 adjustable-rate mortgage (ARM) refinance rates among others.

    Product Interest Rate APR
    30-Year Fixed Rate3.040%3.380%
    30-Year FHA Rate3.240%3.740%
    30-Year VA Rate2.910%3.090%
    30-Year Jumbo Rate3.100%3.220%
    20-Year Fixed Rate2.980%3.270%
    15-Year Fixed Rate2.570%2.890%
    15-Year Fixed Jumbo Rate2.600%2.660%
    5/1 ARM Rate3.070%4.060%
    7/1 ARM Rate3.020%3.960%
    7/1 ARM Jumbo Rate2.970%3.960%
    10/1 ARM Rate3.090%3.910%

    Rates data as of 10/19/2020

    Best VA loans for bad credit

    Best VA lenders for bad credit

    LenderMin. Credit Score30-Year APRKey Benefit
    Freedom Mortgage620Not listedHelpful affordability and purchase tools
    Veterans United6603.021%Highest volume of loans approved
    Veterans First Mortgage620Not listedOffers FHA and USDA options
    Navy FederalNot listed3.195%Offers additional banking services
    USAA6203.971%Offers jumbo loans and ARMs

    Best for the worst cred – JG Wentworth (Freedom Mortgage)

    Around for over 25 years, Freedom Mortgage continues to offer quality service for traditional loans and for VA loans.

    J.D. Power Rating
    3/5
    Min. Credit
    620
    Min. Down Payment
    3%
    SimpleScore
    3.8 / 5.0
    close
    SimpleScore JG Wentworth (Freedom Mortgage) 3.8
    Perks 4
    Credit Impact 3
    Customer Satisfaction 3
    Product Variety 5
    Fees N/A

    Since its founding in 1990, the company has provided mortgage services for over 1 million satisfied customers. On the company’s website, it discusses how most VA lenders are only willing to work with buyers that have, at the very least, a 620 credit score. But Freedom Mortgage goes on further to state that it is willing to work with someone with a credit score lower than that. The company achieves this by looking at the full financial picture, instead of just credit reports.

    Best for experienced lenders – Veterans United

    In 2018 and 2019, Veterans United provided more VA loans by total volume than any other company on the market.

     

    J.D. Power Rating
    5/5
    Min. Credit
    660
    Min. Down Payment
    0%
    SimpleScore
    3.8 / 5.0
    close
    SimpleScore Veterans United 3.8
    Perks 3
    Credit Impact 3
    Customer Satisfaction 5
    Product Variety 4
    Fees 4

    If you look strictly at purchase loans, that streak stretches even further back to 2016. What this means for you is Veterans United  is a company with experience working with VA loans and a company that has approved more people each year than any other company. Current interest rates on VA loans through the company are 3.02% APR for 30-year loans and 3.23% APR for 15-year loans. According to the company’s website, the minimum credit score required by most companies for a VA loan is 660.

    Best for exploring options – Veterans First Mortgage

    To date, Veterans First Mortgage has helped over 175,000 people, with loans totaling over $21 billion.

    J.D. Power Rating
    N/A
    Min. Credit
    620
    Min. Down Payment
    0%
    SimpleScore
    3 / 5.0
    close
    SimpleScore Veterans First Mortgage 3
    Perks 3
    Credit Impact 3
    Customer Satisfaction N/A
    Product Variety 3
    Fees 3

    Thanks to quality service over 30 years in business, the lender has earned an A+ rating with the Better Business Bureau. What’s great about this lender is it advertises that it looks forward to speaking to people who might not be sure of their plans yet. If you find yourself exploring different options, a loan officer from Veterans First Mortgage could be a good first stop. Not only will the lender take the time to talk to you, but it also offers FHA and USDA loans, which might be a better fit.

    Best for 15-year mortgage – Navy Federal Credit Union

    Navy Federal has been a household name for military banking and lending for years.

    J.D. Power Rating
    5/5
    Min. Credit
    Not Specified
    Min. Down Payment
    0%
    SimpleScore
    3.4 / 5.0
    close
    SimpleScore Navy Federal Credit Union 3.4
    Perks 4
    Credit Impact 4
    Customer Satisfaction 5
    Product Variety 3
    Fees 1

    If you’re looking for somewhere that you can handle your traditional banking as well as your mortgage, the company might be a good fit. VA loans from Navy Federal currently have rates as low as 3.195% for 30-year loans and 3.224% for 15-year loans. Additionally, the credit union will allow the seller to contribute 4% of the value of the home towards closing costs to further help with cash out of pocket. You can also get access to the RealtyPlus program through Navy Federal to help link you with a realtor to find the home of your dreams. The current satisfaction level on the program is 98%.

    Best for adjustable rate VA loans – USAA

    The company offers VA loans as well as a ton of other services to service members and their families.

    J.D. Power Rating
    5/5
    Min. Credit
    620
    Min. Down Payment
    3%
    SimpleScore
    3.8 / 5.0
    close
    SimpleScore USAA 3.8
    Perks 4
    Credit Impact 3
    Customer Satisfaction 5
    Product Variety 4
    Fees 3

    USAA has been around for almost a decade now operating from its San Antonio, Texas, headquarters. Currently, VA loan rates at the bank are 3.971% APR on 30-year VA loans and 4.115% APR on 15-year VA loans. What’s unique about USAA is the bank also offers a 5/1 adjustable-rate mortgage (ARM) loan and two jumbo loan options (30-year and 5/1 ARM). As expected, rates are higher on these two products at 4.125% APR for the 5/1 ARM, 4.88% APR Jumbo 30 Year and 4.13% APR on the Jumbo 5/1 ARM.

    What is a VA loan?

    The VA loan is a special loan that is only available to active military or former military that meet the required veteran’s status. Additionally, National Guard and Reserve soldiers are eligible after six years of service or 90 days of active-duty service, not including TRADOC time.

    The perks of the loan start with the fact that you are able to get into a home without any down payment. With other loans, the minimum required is at least 3.5% — preferably 20% — making this an incredible savings option. Additionally, you’re not required to carry private mortgage insurance with a VA loan. All other lenders must pay this additional premium until they have 20% equity built up in their homes.

    How should I choose the right VA loan?

    When you’re shopping for lenders, it’s important to look at more than just the rate you’re quoted. While this is one of the most important factors as it affects your payment size and total cost, it’s not the whole picture. You’ll want to look at the repayment terms, the track record of the lender, and any other available resources. Additionally, since you’re looking for a bad credit VA loan, take the time to comb through the eligibility requirements. Many lenders may let you see if you prequalify within minutes and without a hit to your credit score.

    We welcome your feedback on this article. Contact us at inquiries@thesimpledollar.com with comments or questions.

    Methodology

    SimpleScore

    We’ve created the SimpleScore to help you objectively compare products and services here at The Simple Dollar.

    Our editorial team:

    • Identifies five factors to compare across each brand
    • Determines the rating criteria for each factor
    • Calculate an average of those five factor scores to get one SimpleScore

    We break down each of these five factors and their rating criteria for our review of the best mortgage companies.

    Why do some brands have different SimpleScores on different pages?

    Some brands like Bank of America, Wells Fargo, and Chase have different SimpleScores because they offer more than one financial solution — like home loans, auto loans, personal loans and more.

    For instance, in our Bank of America Mortgage Review, we give the company a 3.8 out 5 based on our five rating factors for mortgages. In our Bank of America Auto Loans Review, we give the company a 4.4 out of 5 based on our rating factors for auto loans. By tailoring our SimpleScore to each financial solution, we’re able to give you a more accurate view of a brand’s services and how it compares to competitors’ services.

    Perks

    Mortgage lending companies that provide more perks receive a higher score from us.

    Hard/Soft credit checks

    We know that credit checks affect your score –– that’s why we favor companies that offer soft credit checks or hard credit checks when you want to see your pre-approval rates.

    Customer satisfaction

    We use the J.D. Power 2019 Mortgage Origination Satisfaction Study℠ to find out how customers rate their experience with each company. (If a company is not included in J.D. Power’s study, we skip this rating factor and average the remaining factor scores.)

    Product variety

    Mortgage lenders that offer more products for their home loans are given higher scores.

    Fees

    Fees can add up fast. Companies that don’t require as many fees for your home loan receive a higher score with us.

    Jason Lee

    Contributing Writer

    Jason Lee is a U.S.-based freelance writer with a passion for writing about dating, banking, tech, personal growth, food and personal finance. As a business owner, relationship strategist, and officer in the U.S. military, Jason enjoys sharing his unique knowledge base and skill sets with the rest of the world. Follow Jason on Facebook here