Future Military Homeowners
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Veterans benefits have been around for decades, but there’s no promise that everyone with military service can actually get VA loans.
This may seem fairly odd given that VA loans are one of the most important benefits offered to whose who serve. However, it is a fact that access to VA home financing is neither guaranteed nor automatic.
As the VA explains, it “cannot compel a lender to make a loan that would violate their lender policies. Lenders must also comply with VA income and credit standards. If a lender is unwilling to make a loan to you, we can only suggest that you try other lenders.”
What the VA is saying is that it’s there to help with specialized mortgage insurance, but the borrower must first be financially qualified.
Veterans benefits have been around for decades, but there’s no promise that everyone with military service can actually get VA loans.
As an example, lenders talk about “front” and “back” ratios when comparing debts and income. With most loans the front ratio compares monthly income with such costs as car payments and required credit card debt. The back ratio includes all the costs in the front ratio plus housing expenses such as mortgage principal, mortgage interest, property taxes and property insurance (PITI).
To illustrate, suppose you have a monthly income of $6,000. If 25 percent of your income before taxes can be devoted to monthly debts, lenders will allow you to have expenses for such things as car loans and credit card debt of no more than $1,500.
With a conventional mortgage you might see a front ratio of 28 percent and a back ratio of 36 percent (or, technically, 28/36). With VA financing the ratios are 41/41. In other words the VA has extremely liberal qualifying standards. With a given income you can borrow much more under the VA program than with conventional financing and by keeping down debts you can qualify for an even bigger loan than would otherwise be possible.
Beyond that, prospective VA borrowers with a debt-to-income ratio greater than 41 percent may still be able to secure home financing.
What about credit scores?
Credit scores reflect not how much you earn but how you handle debt. In the case of VA loans the real importance of credit scores is that a good score will help you get a lower mortgage rate. This means there’s a real financial benefit to paying bills on time and in full. Right now most lenders are looking for a score of at least 620.
You’ve worked hard for your VA benefits but with mortgages have to keep an eye on the bottom line – whether you’re now on active duty or out of the service.
Photo courtesy of puzzler4879
8 Comments
Why doesn’t Government have to pay their debt to ratio??????Why hasn’t Reid/Obama been held accountable for NOT having a “budget” for the last four years, haven’t they broken Constitutional Law?????????are we not a Nation of Laws??????
Give me a break, Obama has done more for the military than Bush ever did. What has your cry baby speaker of the house done for the military or the american people for that matter?? Their approval rating isn’t 8% for nothing ya know!
I have a VA loan. I got it in 2008 and it’s worked out pretty great. I’ve even done a refinance with it recently. I have to say though if you make 6k a month you can probably manage a regular loan.
Ha ha, I agree with you Herbert. The reality is Joseph that the Republican President, Congress and Senate early in the 2000s ran up the credit card with tax breaks for the rich, two wars and lots of dumb spending all paid for on credit. All of those trillions of dollars were borrowed against the future, our future, borrowed from China. Then, Obama gets elected, a Democratic majority takes the Senate and all of a sudden the bills are due.
Only those who don’t understand that when you borrow money you have to pay it back are swinging from the trees about our national debt all of a sudden. Where were you all when the money was beings spent? I remember where you were, you were cheering Bush and Cheney like they were super heroes.
I was in the Air Force National Guard and I have an honorable discharge, but they I am not eligible for a V.A. loan. Why?
Sharon-
Service members and veterans may qualify with more than six years of service in the National Guard or the Reserves. Please contact our VA loan specialists at 888-212-1958 to talk about your specific situation.
The politics aside your lender is the front end decision maker and not the VA on giving you a loan.
Tim Swift, I too used my VA loan in Jan 08. IF people used common sense they could get a much better house than they settle for. Sunset Valley is a city within the Austin area, very nice. 3 huge shopping centers within walking distance of the west side house easy. Me and wifey ate at a restaurant and I saw these big 2 story houses going up, and I was like hey, let’s go check them out. I was thinking they would be like my stepdad’s house in Round Rock, TX which is also strong economically, 270k more or less where he lives. When we walked in the office (It was closed but this blonde opened the door and she was one of the realtors for Mercedes homes.) and I asked how much they wanted for the brand new 2 story houses. She said “I got one available in Jan and it is 400k.” My mouth dropped to the floor and I was getting up to leave with spouse and Shannon was like “Hold on a minute, you are wearing a D.S. BDU shirt, did you serve?” I said yes ma’am and I’m 100% service connected perm and total for exposures to neurotoxins and other things. She obviously knew about VA ratings cause she goes “Does your wife work?” I said yes ma’am. She goes “one final ?, do you have any debts?” I smiled and said no ma’am, my stepdaddy who was well off taught me to stay away from debt. She got my wife’s income and mine, then called regional and said “I got a disabled combat vet here, I’ve seen his VA I.D. and it says service connected, can we give him a break?” She got off phone and said “How bout 385k?” I asked can you make this work? She goes “me and my team will finance you and yes, we work with VA and yes, we will make it work.” I got the house even though at the time it ate up most of my check 2300 plus out of 2600 at the time? My wife works and gets about 2k a month. So I was almost at the 50% mark! If I had had 1 single, just one single bill like a car note? I would have been no-go in getting that house. I got refinanced thru VA streamline earlier this year @ 3.75% so I have more disposable income, and Nationstar mortgage said 450k, and I know they were right on money cause Trulia said same. Now? 459k and rising, especially since I’m going solar w/o the help of VA home improvement loan. We get 70% rebate off 7.5Kw system and 0% financing for 5 years. I’m also going tankless, and after that? Next year if the pattern keeps up and Austin does have a very strong economy, I could ask half a mil easy. So to all these vets that say I wish, or I can’t? YOU CAN if you use common sense!
Jack Morris
1048 Sunflower Trail
Sunset Valley, TX 78745
A really good text with many many useful things for us! Thanks Jack Morris.
Kim from VN