VA Loan Residual Income Requirement And Guidelines
This Article Is About The VA Loan Residual Income Requirement And Guidelines:
VA Loans is probably the best residential mortgage loan program in the U.S.
However, VA Loans are only for Veterans who have served in the Armed Services of the U.S. with an honorable discharge and a Certificate of Eligibility.
VA Loans offers the following:
- VA Loan Programs are only available to Veterans of the U.S. Military with a Certificate of Eligibility
- Zero down payment requirement
- Homebuyers can purchase a home with no money down and 100% financing
- Mortgage Rates are one of the lowest out of all mortgage loan programs
- No annual mortgage insurance premiums even with 100% Loan To Value
- Requires Funding Fee
- But the VA Funding Fee can be rolled into Loan Balance
- 100% Cash-Out Refinance permitted
- Buyers are eligible to purchase one to four-unit owner occupant properties
- The Department of Veteran Affairs does not mandate a minimum credit score
- The Department of Veteran Affairs does not have a maximum debt to income ratio requirement
- VA Loans have outperformed any other government loan programs such as FHA, USDA, Conventional Loan programs
- Borrowers defaulting on VA Loans are much less than any other loan programs
- Even though borrowers do not pay any money down on their home purchases
- VA Loans are easier to qualify than any other loan program
- Again, you need to be a Veteran with a Certificate of Eligibility to qualify
- One of the greatest benefits of being a Veteran of the United States Armed Services is the ability to be eligible for VA Loans
Veterans who are eligible for VA Loan are under the scrutiny of the VA Loan Residual Income Requirement.
What Is VA Loan Residual Income Requirement?
The United States Department of Veteran Affairs offers one of the easiest mortgage loan programs to qualify for. Again, not everyone can qualify for a VA Loan. Need to be Veterans of the United States Military with an active COE, which is short for Certificate of Eligibility.
Here are two important characteristics of VA Loans:
- VA does not require a minimum credit score
- Lenders set minimum credit scores as part of the lender Overlay
Or email us at [email protected] Gustan Cho Associates has no overlays on VA Loans. VA does not have a maximum debt to income ratio requirement. I have gotten approve/eligible per Automated Underwriting System on VA Loans with under 600 Credit Scores and a 60% debt to income ratio.
VA does consider residual income on factoring automated approvals.
Importance Of VA Loan Residual Income Requirements For Borrowers With Bad Credit
VA Loan Residual Income Requirement takes residual income consideration on all Loans. Residual income is defined as the number of funds that is readily available to borrowers
Residual Income is taken into account after deducting all monthly expenses such as the following:
- minimum monthly credit card debts
- installment debts, student loans
- auto loans
- mortgage payments from borrowers monthly gross income
VA Loan Residual Income Requirement needs to have a certain amount of funds left over after the above deductions in order to cover other expenses:
It cannot be used in the calculation of borrower debt to income ratio which is called Residual Income.
Factors That Affect The VA Loan Residual Income Requirement
Examples of other expenses that need to be covered with Residual Income are the following:
- Child Care
- Savings and Reserves
- Health and Auto Insurance
- Cell Phone Bills
- Internet and Cable Services
- Entertainment and Vacations
- Other Miscellaneous Expenses
How Is VA Loan Residual Income Requirement
Residual Income is normally calculated on the number of folks in the household of the Veteran borrower as well as the part of the county in which the home is located. The areas are classified as the following:
VA Loan Residual Income Requirement sets for VA Loans of under and over $79,999.
The main reason for VA Loan Residual Income Requirement is because the Department of Veterans Affairs wants to make sure borrowers has enough money readily available for everyday expenses such as the following:
- child care
- health care
Besides the new housing payment, VA wants to make sure the new homeowner has enough to pay the above expenses. This is one of the main reasons why VA loans have one of the lowest default rates out of any loan program.
Getting Automated Approval On A VA Loan With Low Credit Scores And High DTI
As I mentioned earlier, I got an approve/eligible per Automated Underwriting System on a borrower with a 580 Credit Score, 60% debt to income ratio, and open outstanding unpaid collections accounts. How is that possible? Here is why:
- VA does not have minimum credit score requirements
- VA does not have a maximum debt to income ratio requirement
- This holds true as long as the borrower has sufficient residual income
- This borrower met all of the above requirements
- Especially the sufficient VA Loan Residual Income Requirement
The key for sufficient residual income is the more income the VA borrower makes, the more residual income a borrower has.
For example, let’s take a case scenario:
- Total housing and monthly payments are $3,000 and the borrower has a monthly gross income of $5,000
- 60% debt to income ratio with $2,000 in residual income
- Borrower total housing and monthly payments are $6,000
- The borrower has a monthly gross income of $10,000
- 60% debt to income ratio with $4,000 in residual income
- A borrower with a higher monthly gross income has more residual income
- So VA will consider a borrower with more residual income a stronger borrower
- Automated Underwriting System will likely favor the borrower with a larger residual income
- Chances of getting an approve/eligible per Automated Underwriting System at 60% DTI and 580 FICO credit scores are likely
If you have any questions on VA Loans and need a VA Lender who has no overlays, please contact us at Gustan Cho Associates at 262-716-8151 or text for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.