Can I Qualify For VA Loan With High DTI And Low Credit Scores

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This BLOG On Can I Qualify For VA Loan With High DTI Was PUBLISHED On September 9th, 2020

Can I Qualify For VA Loan With High DTI
Can I Qualify For VA Loan With High DTI

VA Loans is the best mortgage loan program in the United States.

  • There is no down payment required and there is no monthly mortgage insurance premium on VA Loans
  • Interest Rates on VA Mortgages are lower than any other loan program due to the government guarantee
  • The U.S. Government limits VA Loans for Veteran Borrowers only with a certificate of eligibility (COE)
  • Veteran Borrowers can qualify for VA Loans with high debt to income ratios and lower credit scores

In this article, we will cover and discuss how Can I Qualify For VA Loan With High DTI And Low Credit Scores.

Can I Qualify For VA Loan With High DTI?

There is no debt to income ratio requirements on VA Loans. So why do veteran borrowers get turned down by VA Lenders due to high debt to income ratios? It is because most Lenders have VA Lender Overlays on debt to income ratios.

  • The answer is yes to the question Can I Qualify For VA Loan With High DTI
  • The Department of Veteran Affairs has one of the most lenient mortgage guidelines out of all mortgage loan programs
  • The United States of Department Affairs realizes that members of the U.S Armed Services have lower credit stores than civilian workers due to them having the chances of being deployed in wartime
  • How can a veteran make timely monthly payments on their debt obligations when they are deployed during wartime and make their monthly mortgage payments on time when they are in combat

The Armed Services are well aware of this and have implemented many more different VA Guidelines for veterans of the armed services.

Can I Qualify For VA Loan With High DTI & How Do I?

Can I Qualify For VA Loan With High DTI? VA Loans are the best residential mortgage loan programs out there.

  • However, not all borrowers qualify for a VA Loans
  • Only veterans of the United States Armed Services with a Certificate of Eligibility can qualify for a VA Loan

Here are the requirements to qualify for VA mortgage loans:

  • To qualify for VA Loans, the borrower needs to have served in a branch of the United States Military 
  • Veteran borrowers need an honorable discharge and a valid Certificate of Eligibility
  • A Certificate of Eligibility is also referred to as a COE
  • There is no debt to income ratio requirements with VA Loans

However, VA Loan does have VA Residual Income Requirements.

VA Guidelines Versus VA Lender Overlays

The Department of Veteran Affairs (VA) does not have any debt to income ratio requirements nor credit score requirements.

There are two separate types of VA Eligibility Requirements:

  1. VA Guidelines by the U.S. Department of Veteran Affairs
  2. VA Lender Overlays which are additional VA Lending Requirements that is implemented by each individual lender

Lenders With Overlays On VA Mortgages

Just because a borrower meets VA Guidelines does not mean that they qualify with all Lenders. Each Lender can have their own overlays on VA Loans. For example, many Lenders may have overlays on DTI where they may cap it at 41%. They may also have overlays on credit scores where the lender may require a 620 credit score.

  • Gustan Cho Associates does not have any overlays on VA Loans

One of our loan officers at Gustan Cho Associates recently closed a VA Loan for a borrower who had a 580 FICO credit score and a 59% debt to income ratio and outstanding collection accounts.

Can I Qualify For VA Loan With High DTI And Less Than Perfect Credit?

Can I Qualify For VA Loan With High DTI And Less Than Perfect Credit?

Gustan Cho Associates Mortgage Group has no overlays on VA Loans. We just go off the automated findings of the Automated Underwriting System (AUS).

  • Only spouses of a Veteran can become co-borrowers on VA Loans
  • Borrowers do not have to pay off outstanding collections and charge offs to qualify for VA Loans
  • There is a two-year waiting period to qualify for a VA Loan after a Chapter 7 Bankruptcy discharged date

There is a two-year waiting period to qualify for a VA Loan after the following:

  • Foreclosure
  • Deed in lieu of foreclosure
  • Short sale

Deferred student loans that are deferred for more than 12 months are exempt from debt to income ratio calculations.

Benefits Of VA Loans

VA does not require any down payment on a home purchase and allows 100% financing:

  • VA allows up to 100% cash-out refinance on single-family homes
  • VA home buyers do not have to worry about coming up with closing costs because closing costs can be covered with sellers concessions and/or lender credit
  • VA allows up to 4% sellers concessions from home sellers and/or lender credit by the lender to cover closing costs
  • There are no annual VA mortgage insurance premium with VA Loans
  • There are funding fee with VA Loans
  • However, there is a one-time funding fee can be rolled into the balance of the VA Loan
  • VA Loans has one of the lowest mortgage interest rates out of any loan program because of the guarantee by the Veterans Administration
  • VA Loans are for one to four-unit owner-occupied properties only
  • Veterans cannot use VA entitlement on second homes or investment homes

Gustan Cho Associates closes VA Loans in 21 days or less.

Qualifying For VA Loan With High DTI With Lender With No Overlays

Many of our viewers who are reading this blog are probably scratching their heads and really confused because they were told the following by other VA Mortgage Companies and/or Banks:

  • Maximum debt to income ratio to qualify for a VA Loan is 41% DTI to 43% DTI
  • The minimum credit score to qualify for a VA Loan is 640 
  • Borrowers cannot have any outstanding collection accounts and/or charge off accounts to qualify for VA Loans
  • Need a minimum of three credit tradelines to qualify for VA Loans

Qualifying For VA Loans With Direct Lender With No Overlays

All of the above VA lending requirements are not those of the VA but are lender overlays. Gustan Cho Associates at Loan Cabin Inc. is a direct VA Lender with no overlays on VA Loans:

  • Lenders can have their own overlays on VA Loans and do not have to follow VA Guidelines

Lenders do have to meet minimum VA Guidelines but they can have higher standards and requirements than VA Guidelines.

VA Loans During And After Chapter 13 Bankruptcy

Most Lenders have VA Lender Overlays with qualifying for VA Loans During And After Chapter 13 Bankruptcy.

Here are VA Guidelines During & After Chapter 13 Bankruptcy:

  • Veteran Borrowers can qualify for VA Loans one year into a Chapter 13 Bankruptcy Repayment Plan
  • There is no waiting period after Chapter 13 Bankruptcy Discharge Date to qualify for VA Loans
  • A large percentage of our borrowers at Gustan Cho Associates are veteran borrowers who are in a Chapter 13 Repayment Plan and/or who just got their Chapter 13 Bankruptcy discharged

Borrowers who meet VA Lending Guidelines but the lender they consulted with has VA Lender Overlays, stop looking further, and call Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates does not have any lender overlays on VA Loans. We are available 7 days a week, evenings, weekends, and holidays.

2 Comments
  1. Torrence Deyampert says

    Need help with home purchase with VA loan and low credit score.

    1. Gustan Cho, NMLS 873293 says

      Thank you for reaching out to us. Can you please contact us at gcho@loancabin.com or call and/or text us at 262-716-8151 for faster response. We are direct lenders with no lender overlays on VA loans. There is no credit score requirements on VA loans or DTI caps. Looking forward to working with you and your family.

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