VA Loan With High DTI And Bad Credit With No Overlays

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VA Loan With High DTI And Bad Credit With No Overlays

This Article On VA Loan With High DTI And Bad Credit With No Overlays Was UPDATED On November 13th, 2018

Many home buyers are told that they do not qualify for a VA Loan With High DTI by lenders.

  • VA does not have a debt to income ratio requirements
  • Reason why they are told that they do not qualify for a VA Loan With High DTI is not because it is a VA Guidelines on Debt to Income Ratio but because it is the lender’s own lender overlays
  • Gustan Cho Associates at Loan Cabin Inc. NMLS 1657322 has no overlays on VA Home Loans
  • We do not have any minimum credit score requirements
  • Gustan Cho Associates has no maximum debt to income ratio caps
  • All we go by is the automated findings on Automated Underwriting System

What Are Lenders Overlays On VA Home Loans

Overlays can be explained as follows:

  • The United States Department of Veteran Affairs, VA, is not a lender
  • VA is a  government agency that guarantees and insures lenders in the event borrower default and/or foreclosure on VA Loans
  • In order for VA to insure a home loan, lender needs to follow minimum VA Mortgage Lending Guidelines
  • VA does not have a minimum credit score nor a debt to income ratio requirement
  • As long as the Veteran borrower can get an approve/eligible per Automated Underwriting System, VA will insure and guarantee loans
  • However, most lenders have overlays on VA Loans
  • Overlays on VA Loans are additional requirements that the lender will impose on top of the minimum VA Guidelines
  • For example, if a Veteran gets an approve/eligible per AUS FINDINGS with a credit score of 550 FICO and 60% debt to income ratio, there is no reason why a lender cannot get this borrower approved and get their VA Loan closed
  • But the lender can say no
  • Lenders can impose a higher credit score requirement
  • For example if borrowers has 580 credit score with an AUS Approval, lenders can require 640 FICO due to their overlays
  • The lender can also set a maximum debt to income ratio requirement such as not greater than 41% debt to income ratio
  • VA does not require that the Veteran borrower pay off outstanding collection accounts and charge off accounts in order to get an approve/eligible per Automated Underwriting System
  • However, a lender can have overlays
  • Lenders can require borrower pay off all collections and charge off accounts
  • If you are told that you do not qualify for a VA Loan, please contact Gustan Cho Associates
  • We do not have any overlays on VA Loans
  • This holds true as long as borrowers can get an automated approval per AUS FINDINGS
  • VA does have a residual income requirement

VA Loan With High DTI

Adding Co-Borrowers To Resolve VA Loan With High DTI

Gustan Cho Associates specializes in helping borrowers qualify for VA Loan With High DTI.

VA has different requirements on non-occupant co-borrowers and co-borrowers on VA than FHA Loans. With FHA Loans here are the requirements on co-borrowers:

  • Can add a non-occupant co-borrower or co-borrowers on FHA Loans
  • Non-occupant co-borrowers needs to be related to the borrower by law, marriage, or blood for FHA Loans

Here are the VA Guidelines on co-borrowers with VA Loans:

  • VA Loans prohibit adding non-occupant co-borrowers on VA Loans
  • VA Loans does allow married spouses to be added as co-borrower on a VA Loan

How Is Debt To Income Ratio On VA Loans Calculated

Debt to income ratio is calculated as follows by lenders:

  • DTI, or debt to income ratio, is the sum of all the borrower’s minimum monthly payments divided by the borrower’s monthly gross income
  • Monthly debts that are calculated are the debts that only report on the borrower’s credit report such as the following:
    • minimum credit card payments
    • minimum monthly installment loan payments
    • auto payments
    • student loan payments
    • child support payments
    • alimony payments
    • monthly payment agreements on tax liens, judgments, or other large debts with payment agreements
    • PLUS the proposed principal, interest, taxes, insurance (P,I,T,I) of the proposed home purchase
  • Gross income is only qualified income that can be documented and cash income does not count
  • Then take the sum of all monthly debts and divide it by the borrowers monthly gross qualified income
  • That yields the debt to income ratio
  • Monthly debts that is not included are the following:
    • utilities
    • car insurance
    • health insurance
    • child care
    • or any other debts that do not report to credit bureaus and is not on the credit report

Getting Pre-Approved For VA Loan With High DTI And No Overlays

VA does not require a maximum debt to income ratio nor credit score requirement. Borrowers told they do not qualify for a VA Loan with high DTI or overlays on VA Loans, please contact us Gustan Cho Associates at 262-716-8151 or text for faster response. Or email us at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays. We do not have any overlays on VA Loans with the exception of requiring a 580 FICO Credit Score.

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