VA Loan With High DTI

This Article On VA Loan With High DTI Was Written By Gustan Cho

Many Veteran 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 . VA Lender Overlays can be explained as follows:

  • The United States Department of Veteran Affairs, VA, is not a lender but a government agency that guarantees private mortgage lenders against borrower default and/or foreclosure on VA Loans
  • In order for VA to insure a VA Loan, the mortgage 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 the VA Loan
  • 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 580 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 and can impose a higher credit score requirement than the 580 such as requiring a 640 FICO Credit Score
  • 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 lender overlays stating that the Veteran borrower pay off all collections and charge off accounts in order for them to do the VA Loan
  • If you are told that you do not qualify for a VA Loan, please contact The Gustan Cho Team. We do not have any overlays on VA Loans as long as you meet a 580 FICO credit score and can get an automated approval per AUS FINDINGS
  • VA does have a residual income requirement

Adding Co-Borrowers To Resolve VA Loan With High DTI

The Gustan Cho Team 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 Loans than FHA Loans. With FHA Loans here are the requirements on co-borrowers:

  • You 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 minimum credit card payments, minimum monthly installment loan payments, auto payments, student loan payments, child support payments, alimony payments, and 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
  • You then take the sum of all monthly debts and divide it by the borrowers monthly gross qualified income and that yield the debt to income ratio
  • Monthly debts that is not included are 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. If you are told that you do not qualify for a VA Loan with high DTI or overlays on VA Loans, please contact Gustan Cho at 262-878-1965 or text us at 262-716-8151 for faster response. You can also email us at gcho@gustancho.com 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.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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