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VA Loan / Veteran Mortgage News
SPONSOR:
Pioneer Military Loans offers responsible military lending solutions that can help
service members avoid or break the debt cycle. Pioneer serves active-duty and career-retired military service members,
as well as Department of Defense employees.
JANUARY 2005
VA Debt-to-Income Ratios Explained
According to VA guidelines, borrowers and / or their spouse must qualify according to set debt ratios which are used to determine whether the borrower can reasonable be expected to meet the expenses involved with home ownership.
TOTAL FIXED PAYMENT TO EFFECTIVE INCOME
Add up the total mortgage payment (principal and interest, escrow deposits for taxes, hazard insurance, homeowners' dues, etc.) and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards, etc.). Then, take that amount and divide it by the gross monthly income. The maximum ratio to qualify is 41%. In the event the number exceeds the 41%, the VA has a residual income guideline which can allow approval, yet are not considered a compensating factor.
EXAMPLE:
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Total amount of new house payment: |
$650 |
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Total amount of monthly revolving debt: |
$300 |
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Total amount of monthly recurring debt: |
$950 |
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Borrower's gross monthly income (including spouse, if married): |
$2,400 |
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Divide total house payment by gross monthly income: |
$950/$2,400 |
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Debt to income ratio: |
39.58% |
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Please note that the above indicators do not exclusively determine whether or not a veteran will qualify for a VA loan. Compensating factors may affect the loan decision. These factors are especially important when reviewing loans which are marginal with respect to residual income or debt-to-income ratio. They cannot be used to compensate for unsatisfactory credit.
Some compensating factors include, but are not limited to the following:
- Excellent credit history
- Conservative use of consumer credit
- Minimal consumer debt
- Long-term employment
- Significant liquid assets
- Military benefits and more
The GI Bill Can Change Your Future.
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Put Your Goals First
Small daily choices make a big difference over time. For instance, many families realize they must cut back on other expenses in order to buy the home they want.
A great way to do this is by deciding on an amount of money that you'll find ways to save every day. You'll then have more funds for your mortgage payments.
Looking carefully at our spending habits, and then doing without or finding cheaper substitutes quickly adds up. Some folks start bringing their lunch to work every day.
Others sell a vehicle that's not essential. Or they stop using credit cards, in order to bring their unpaid balances to zero.
You don't have to make a lot of money to become rich. An easier way is to spend less than you earn. While that's hard for many of us to do, the rewards are real.
Stable & Affordable Housing Costs
Many home buyers are finding that a "VA hybrid Arm loan" that combines the strengths of a fixed-rate and an adjustable-rate mortgage best suits their needs today. Hybrid loans have an initial fixed-rate period, so your mortgage payment will remain stable then.
You can choose to enjoy fixed rates for anywhere from three to five years before your mortgage adjusts to reflect current interest rates. You benefit from a lower monthly payment than what's offered on 30-year home loans, because you're not paying for three decades of fixed rates.
Many owners find they're ready to move before their hybrid mortgage rate adjusts. Locking in fixed rates is helpful now, since a stronger economy means we'll most likely have higher rates in the future.
Contact us soon to find out how different mortgage options would fit into your budget. When you're ready to move, we'll help you obtain financing that lets you reach your goals.
Great Purchase Opportunities
Condominium sales set an all-time record last year, and that demand reflects their attractiveness to many buyers. Young persons appreciate their lower cost, when compared to traditional houses.
Condos and townhouses don't need as much land per unit as a single-family home does. That lowers their cost - and is a plus for folks who don't want a lot of grass to mow.
Families whose children have moved out also are likely candidates for buying condos. Some sell their existing home, move into a smaller condo, and have funds left over for their retirement.
Because both young and mature buyers are attracted to condos, you can find them with different amenities and prices. However, look for a development where most of the owners actually live, rather than renting them out.
Absentee owners are less likely to approve funds for necessary maintenance. Most owners also prefer living with other long-term residents, rather than temporary tenants.
No matter what type of housing is best for you, call us to find great financing tools. We'll make moving into a new place as easy as possible for you.
Starting Small Pays Off
Four out of ten homebuyers today are making their first purchase, reports the National Association of Realtors (NAR). Moving into your first home is a huge step, and a crucial one for starting to build wealth.
Yet it makes sense not to be overly ambitious on your first purchase. Stretching your budget severely when buying a house can make everyday life more challenging.
We'll assist you by providing home financing at attractive rates. We'll also show how your loan payments could change in the future, which would affect your household budget.
Leaving some slack in your budget is a smart idea for most buyers. After all, you'll also need to pay for ongoing home maintenance and repairs. You may want extra funds to buy furnishings after moving in, as well.
To have that additional money, you may need to buy a less-expensive home. Here are some ideas to consider:
1. Decide what features are "must haves" and which ones you can live without. Buying in a certain school district might be your first priority. You then may decide that having a smaller kitchen or garage are reasonable sacrifices to make in order to gain your primary goal.
2. Find a house that's in a nice neighborhood, but in less than perfect condition. Perhaps it's been a rental unit, or the previous owners didn't have the energy or funds to keep it up.
Obtain a professional home inspection before buying, to make sure no major problems are present. You may locate a bargain that simply needs some paint and new landscaping.
Let us show you affordable ways that you can buy a nice home soon. We understand that your first purchase is the toughest, so we'll be sure to answer all your questions and help you buy a house you'll love!
Reaching for Your Dreams
Owning a home is a major goal for many households. Fortunately, buying a house also helps you achieve other objectives. Here are some examples of dreams that homeownership can make real -
- Caring for your family. Having a special place of your own provides safety and security for everyone in your household.
- Enjoying more freedom. Some folks believe that buying a house ties them down, but actually the opposite is true.
Homeowners benefit from ever-growing real estate values. In the future that will make it easier for you to move to a bigger house or better neighborhood.
Wealth achieved through homeownership also can give you the opportunity to start a business, pay for children's educations, or retire at ease. Feel free to contact us to learn more about how homeownership can assist you in reaching your life goals.
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