This BLOG On VA Mortgage Debt To Income Ratio Guidelines With No Overlays Was PUBLISHED On May 30th, 2020
It is a well-known statistic that many Americans are in debt.
- There have been studies that show up to 8 out of 10 Americans are in some kind of debt
- Well veterans are part of those statistics
- This may be holding veteran home buyers back from obtaining a mortgage
- Most lenders have lender overlays on their VA Loan programs
- There are Debt to Income or DTI guidelines that must be followed
- Per VA Mortgage Debt To Income Ratio Guidelines, the Department of Veteran Affairs does not have a maximum DTI cap like other loan programs
- VA does require residual income that will also need to be met
- This is something that can be very confusing in the process
- Most VA loans do not require a down payment
- The 100% financing on VA Home Loans makes it easier to obtain home loans for the men and women who served this great Nation
- But even without a down payment, many Veterans are having trouble qualifying
- The two most common reasons for that are debt to income and credit score
In this article, we will discuss and cover VA Mortgage Debt To Income Ratio Guidelines With No Overlays.
VA Mortgage Debt To Income Ratio Guidelines And How DTI Is Calculated
Debt to income is calculated with two important percentages:
- front-end debt to income
- back end debt to income
This is one of the key factors to obtain an AUS approval. The great news on VA Loans is the leniency on the VA Guidelines. The Department of Veteran Affairs (VA) does not have a maximum debt to income ratio cap. VA does not have a minimum credit score requirements. There are instances where a veteran will get an automated approval with Debt to Income over 60% DTI.
Reason why VA borrowers can get an automated underwriting system approval with over 60% debt to income ratios is due to the following factors:
- high residual income by veteran borrowers
- could be from a high credit score or high asset account
- If veteran borrowers do meet the AUS Approve/Eligible findings requirements may pass a Manual Underwrite
VA Lenders With No Overlays
Why are we saying that the Department of Veteran Affairs has no maximum DTI caps and no minimum credit score requirements on this blog but most lenders have DTI and credit score requirements?
- This is because most lenders have VA Lender Overlays
- What VA Mortgage Overlays are is when a particular lender has higher mortgage guidelines on VA Loans than those required by the Department of Veteran Affairs
- Gustan Cho Associates has no overlays on VA Home Loans
- Better yet, GCA Mortgage Group has ZERO OVERLAYS on all government and conventional loan programs
Not too many direct lenders have NO OVERLAYS on government and conventional loans.
Automated Underwriting System Approval On VA Loans
Gustan Cho Associates Mortgage Group has zero lender overlays on VA Loans.
- We just follow VA Mortgage Debt To Income Ratio Guidelines that is rendered by the Automated Underwriting System (AUS)
- If VA AUS renders an approve/eligible per AUS on a 65% DTI veteran borrower, we will close that VA Loan
- If the Automated Underwriting System renders an approve/eligible on a 550 credit score veteran borrower
- Gustan Cho Associates will close that VA Loan
Of course, the veteran borrower needs to meet all conditions and stipulations on the AUS Findings.
What Are Manual Underwrites On VA Home Loans
Veteran borrowers who cannot get an approve/eligible per AUS FINDINGS but get a refer/eligible can qualify for VA Loans with Michael Gracz at Gustan Cho Associates via manual underwriting. Manual Underwriting is also for borrowers who are in a current Chapter 13 Bankruptcy or recently gotten a Chapter 13 Bankruptcy discharged without a 2-year seasoning.
If the veteran borrower needs to go with manual underwriting, there are more strict DTI qualifications, see below:
- Credit score below 580 max DTI is 31/43
- 580 and above max DTI is 31/43 with no compensating factors
- 580 and above max DTI is 37/47 with one compensating factor
- 580 and above max DTI is 40/40 with no discretionary debt
- 580 and above max DTI is 40/50 with two compensating factors
Borrowers may be running into some common lender overlays when it comes to debts. Many lenders have extra requirements when it comes to installment debts and student loans. Gustan Cho Associates has ZERO OVERLAYS.
VA Mortgage Debt To Income Ratio Guidelines On Installment Debts
The VA guideline on installment debts with less than 10 payments states this payment can be omitted from borrowers overall debt to income ratio calculations by underwriters:
Student loans are commonly over calculated against debt to income ratios. The common misconception is mortgage underwriters must count 1% of student loan balance against borrowers DTI, but that is incorrect.
Since January 23, 2017, the VA has used the following formula to calculate a monthly student loan payment:
- Use 5% of the total student loan balances
- Then divide that number by 12
This yields a monthly payment to count against DTI.
Example – $50,000 student loan.
- $2,500 / 12 months = $$208.34 Monthly Payment
Lenders must use the payment that reports to the credit report if the amount on the report is higher than the payment from the above calculation.
- For student loans that are deferred for 12 or more months, a monthly payment does not need to be calculated
- Veteran Borrowers must document the loan or loans will not have a payment for a FULL 12 months from closing date
Qualifying For VA Loans With Direct Lender With No Overlays
With the majority of lenders putting extra overlays on their VA loan programs, doing research can be very confusing.
- Do not let this deter from the home of your dreams
- With a simple Google search, most veterans see they must have a 620 credit score
- Please remember, that is an overlay
With all the differences from lender to lender, please contact us Gustan Cho Associates at 262-716-8151 or text us for a faster response to go over your situation. Borrowers will then be paired with a licensed loan officer in your state. The majority of clients at Gustan Cho Associates have been turned down by their current lender due to lender overlays. If for some reason we cannot get you qualified today, we will put you a plan so you can accomplish your goal of homeownership. There is light at the end of the tunnel.
There are very few situations we have not seen before. Stop making your landlord rich and start building equity in your dream home ASAP.
About The Author Of VA Mortgage Debt To Income Ratio Guidelines
Michael Gracz is the author of this blog on VA Mortgage Debt To Income Ratio Guidelines. Mike Gracz is a senior writer and contributing editor of Gustan Cho Associates Mortgage News. Mike Gracz is also a senior loan officer and the National Sales Manager for Gustan Cho Associates Mortgage Group. Mike is an expert in originating and funding VA Loans and is known nationwide for him being a direct lender with no mortgage overlays on government and conventional loans. Over 75% of MIke Gracz borrowers are folks who could not qualify at other lenders or had last-minute loan denials at other lending companies due to their mortgage overlays. Borrowers who need to qualify for VA Loans with no overlays can contact Michael Gracz at 630-659-7644 or text, Mike, for faster response. Michael Gracz is available 7 days a week, evenings, weekends, and holidays.