This BLOG On VA Residual Income Requirements And Guidelines Was PUBLISHED On November 3rd, 2020
VA Home Loans is the best loan program for owner occupant home buyers.
- The U.S. Veterans Administration, commonly referred to as the VA is the federal agency governing VA loans
- The Veterans Administration is not a lender. It is not the responsibility to originate, process, underwrite, and fund VA loans
- Private lenders who are designated approved by the VA originate, process, underwrite, and fund VA loans
- Lenders can offer 100% with no mortgage insurance at competitive low mortgage rates on VA loans due to the government guarantee against loss and/or foreclosure on VA loans
- As long as the lender have followed VA agency lending guidelines on VA loans, the VA will step in and partially guarantee the loss sustained by the lender on the VA loan
- However, not all borrowers can qualify for VA Loans
- VA Mortgages are for eligible active-duty, retired, and/or surviving spouses
- In order for borrowers to qualify for VA Loans, they need a valid Certificate of Eligibility by the VA
- Our loan officers can help with the paperwork in obtaining the COE
VA Loans are for primary owner occupant one to four unit homes only. VA does not allow for second homes and investment property financing.
About VA Home Loans
As mentioned on the previous paragraph, VA loans are the best home mortgage program in the nation.
- There is no other home mortgage program than VA loans
- The U.S. government created VA loans to reward the brave men and woman of the U.S. Armed Services who served this country voluntarily by making it possible to make the dream of homeownership a reality with no down payment and no mortgage insurance at better rates than conventional loans
- VA agency guidelines are more lenient than any other government and/or conventional loans
- Not all members who served in the U.S. Military can qualify for VA loans
- Only eligible active and/or retired members of the United States Armed Services who have earned a certificate of eligibility (COE) are eligible to qualify for VA loans
- VA loans is the only home mortgage program that does not have a minimum credit score requirement or a maximum debt to income ratio cap as long as the borrower has an approve/eligible per automated underwriting system (AUS)
Gustan Cho Associates is a five-star national mortgage company with no lender overlays on VA loans.
The Benefits Of VA Loans
In this section, we will discuss and cover the many benefits of VA loans versus other home mortgage programs:
- The main benefits for VA Loans is 100% financing
- No down payment
- No closing costs with sellers concessions and/or lender credit
- Lower mortgage rates than conventional loans
- No annual mortgage insurance premium
- No minimum credit score requirements
- No maximum debt to income ratio requirements
- Upfront VA funding fee can be rolled into the VA Loan Balance
- As of January 2020, there are no more maximum loan limit cap on VA loans
- The maximum loan limit used to be $510,400 until the maximum loan cap on VA loans was removed
- Prior to eliminating the maximum VA loan limit, any purchases over $510,400, buyers needed to put 25% on the overage of the $510,400
- Very lenient credit guidelines
- Borrowers can qualify for VA Loans 2 years after bankruptcy, foreclosure, deed in lieu of foreclosure, short sale
Borrowers passing the VA residual income test can exceed DTI over 60%. In this blog, we will discuss the important of the VA residual income test for borrowers with high debt to income ratio.
Qualifying For VA Loans With High DTI
VA loans do not have a maximum debt to income ratio cap as long as the borrower can get an approve/eligible per automated underwriting system (AUS). As long as the borrower has sufficient residual income, the automated underwriting system will render an approve/eligible per AUS.
The Department of Veterans Affairs (The VA) has no maximum debt to income ratio requirements.
- However, most lenders have additional mortgage guidelines on VA Loans called lender overlays
- Overlays are additional mortgage lending requirements implemented by individual lenders that is above and beyond of the VA
- This is the reason why most lenders will require minimum DTI requirements such as 41% to 50%
- Gustan Cho Associates is a national mortgage company licensed in multiple states with no overlays on VA Loans
- We have approved and closed countless borrowers with credit scores in the 500’s and debt to income ratios higher than 60%
- However, an approve/eligible per automated underwriting system is required and borrowers need to meet the VA residual income test
VA residual income test is very important because it determines the residual income borrowers have after paying all of their minimum monthly bills including the proposed mortgage payment.
What Is Residual Income Mean?
Many folks get VA residual income confused with debt to income ratios.
- VA residual income is the leftover money consumers have after paying all of the monthly minimum payments including the proposed housing payments
- VA residual income test needs to be met by borrowers
- The minimum residual income depends on the number of family members in a household
Here is the Residual Income Chart:
VA Residual Income Table By Broken Down By Region
Borrowers with higher than $80,000 household income, the following chart explains the VA Residual Income Requirements:
Borrowers who need to qualify for VA Loans with a national five-star mortgage company licensed in multiple states with no overlays, please contact Mike Gracz at Gustan Cho Associates at 630-659-7644 or text us for a faster response. Or email us at mgracz@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays. Gustan Cho Associates Mortgage Group has zero overlays on VA loans. Over 75% of our borrowers at Gustan Cho Associates are folks who either gotten a last minute mortgage denial and/or could not qualify for a VA loan due to the lender’s lender overlays. As long as borrowers get an approve/eligible per automated underwriting system (AUS), we are ready to approve and close the loan. We do not just close your VA Loans but rest assured that we will close it on time.
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My wife and I are in the process of purchasing a home however we have a unique situation. My wife has excellent credit but a little bit of a higher DTI. I have the income so we would both need to probably be on the loan. However, I had a few charged off and delinquent accounts that I did not know about until looking at my credit profile. Most of these have been paid in full but are still n the credit report. Unfortunately, just as of today I filed a dispute on an account that I was unaware of and never been notified on. Will this hinder us from getting approval? Our builder recommended we go through their finance company but now we are worried about too many pulls on our credit.