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I have read and reread the "facts and FAQ's" all day long but am still lost in the sauce. In a nutshell, I am looking to use my VA home loan benefit but the divorce did a whammy on my credit. The judge awarded our truck (in my name only) to the ex and it got reposessed before the judge heard motions to have the title transferred to her name (ding on me). Also, I'm 100% service connected/PH recipient. Are there any little known programs out there that might help us into a VA loan-approved home? We are in Tucson and would love to get feedback by veterans who are AZ licensed realtors. Tango Mike! Uncle, Mark
http://www.benefits.va.gov/homeloans/
http://www.benefits.va.gov/homeloans/
Posted in these groups: 
VA Loan
VA Loan
Edited 10 y ago
Posted 10 y ago
Responses: 17
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SFC Merino,
the bottom line is it's up to the lender and how they view your credit worthiness. The VA doesn't have a minimum credit score requirement.
1) However, many lenders are using 620 as a guideline. (some lenders will go lower, search around)
2) debit-to-income ratio is a huge consideration (below 40%)
3) do a credit dispute with all three credit agencies explaining that vehicle was her responsibility and send the legal document to support that. ( With VA, lenders are making a decision based on entire credit profile, having an explanation of your version of events may be helpful)
the bottom line is it's up to the lender and how they view your credit worthiness. The VA doesn't have a minimum credit score requirement.
1) However, many lenders are using 620 as a guideline. (some lenders will go lower, search around)
2) debit-to-income ratio is a huge consideration (below 40%)
3) do a credit dispute with all three credit agencies explaining that vehicle was her responsibility and send the legal document to support that. ( With VA, lenders are making a decision based on entire credit profile, having an explanation of your version of events may be helpful)
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PO1 Frank Vielbaum
Cpl Duane Danner - No, you don't have to pay the VA back (hooray!) However, you won't be eligible for another VA guarantee for a couple years (at least, depending on circumstances), and it will still eat up your credit score, along with making you ineligible for certain other forms of financial aid (many student loan programs, for instance, won't assist you if you have a foreclosure in the last 12 months.) And, don't forget the IRS, who you may owe taxes to due to "income" based on the foreclosure being essentially a huge loan payment in your name.
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Cpl Duane Danner
I bought my home in 1976, and lost it in 1986. never heard anything from the va until about 3 years ago they sent me a letter telling me they were going to start withholding my va disability until the guarantee on the house loan was satisfied. I don't ever remember anyone telling me that if I defaulted on the load I would have to pay something back. I requested a copy of the form that I would have signed agreeing to this but they told me they didn't have it.
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TSgt (Join to see)
TSgt Theodore Schubert - Private Mortgage Insurance. It's an insurance premium you pay to the lender. It is something you want to avoid if possible. By using your VA benefit you will avoid this. Lenders typically charge this when you put down less than 20% when you buy a home.
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The ins and out of a VA home loan:
1. Certificate of Eligibility (COE) - make sure you have this. You will be required in most cases to provide a copy your DD-214
2. Debt to Income Ratio(DTI) - the calculation that looks at your monthly debt payments compared to your income. By dividing all of your monthly liabilities by your gross monthly income, they come up with a percentage. This figure is known as your DTI, and must fall under a certain percent in order to qualify for a mortgage. The maximum debt-to-income ratio will vary by mortgage lender, loan program, and investor, but the number generally ranges between 40-50%. For VA purposes keep it below 41%.
Let’s look at a basic example of debt-to-income ratio:
$120,000 annual gross income as reported on your tax returns/pay stubs
Monthly liabilities: $3,500
Monthly gross income: $10,000
35% debt-to-income ratio
In this example, your debt-to-income ratio would be 35% ($3,500/$10,000).
However, the debt-to-income ratio goes into greater detail and comes up with two separate percentages, one for all of your monthly liabilities divided by income (back-end DTI ratio), and one for just your proposed monthly housing payment (including taxes and insurance) divided by income (front-end DTI ratio).
So in the above example, if your proposed monthly housing payment makes up $2,000 of your $3,500 in monthly liabilities, your front-end DTI ratio would be 20%, and your back-end DTI ratio would be 35%. Many banks and lenders require both numbers to fall under a certain percentage, though the back-end DTI ratio is more important.
You may see a debt-to-income requirement of say 30/45. Using the example from above, your front-end DTI ratio of 20% would be 10% below the 30% limit, and your back-end DTI ratio of 35% would also have 10% clearance, allowing you to qualify for the loan program, at least as far as income is concerned. However, if your loan is manually underwritten then the maximum debt-to-income ratio is 41% (back-end). There is no front-end requirement for VA loans.
3. Calculate your residual income - VA lenders calculate your residual income to make sure you have enough money left over each month for food, healthcare, and other family expenses. It’s an extra protection to ensure veterans have an affordable home buying option.
How to calculate it:
Your monthly gross income is _____
Spouse’s monthly gross income +
Subtract state and federal taxes/Social Sec Taxes* -
Net =
Subtract credit card, auto loan, & student loan payments -
Subtract estimated utilities (14 cents est per square foot based on home you wish to buy)-
Subtract childcare expenses/child support -
Subtract future mortgage payment, property taxes, homeowners insurance, and HOA dues**-
Estimated VA Residual Income =
(Residual income for Arizona for a family of 2 with a loan amount above $80K is $823.00)
As mentioned earlier, the VA is interested in the big-picture ratio, the back-end number. The VA uses a DTI benchmark of 41 percent, which is higher than what you’ll find with conventional and even FHA financing. **See VA Form 26-6393 Loan Analysis
http://benefits.va.gov/warms/pam26_7.asp
4. VA Funding fees - Generally, all Veterans using the VA Home Loan Guaranty benefit must pay a funding fee. This reduces the loan's cost to taxpayers considering that a VA loan requires no down payment and has no monthly mortgage insurance.
You do not have to pay the fee if you are a:
Veteran receiving VA compensation for a service-connected disability, OR
Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay, OR
Surviving spouse of a Veteran who died in service or from a service-connected disability
http://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp
5. Credit score - with VA the current standard is 620 score. In comparison, the average credit score on an FHA loan denial was 669 in May 2012, according to the National Association
of Realtors. Conventional lenders are looking for even higher credit scores. Borrowers with scores of at least 740 accounted for 53 percent of all loans in August 2011.
In general, credit scores are calculated using a complex web of factors, some 20 in all, broken down into five broad categories that are surprisingly simple and easy to understand.
a. Payment History (35 percent of your score) - The credit agencies have three classes of late payments: 30 days, 60 days and 90 days. On average, a 30-day late payment will knock 40
to 110 points off your score; a 90-day late payment will shave 70 to 135 points.
b. Credit Card Balances (30 percent of your score) - The scoring system looks at how
much you owe and the total amount of credit available to you. Generally, it’s best to keep balances at no more than 30 percent of the credit limit.
c. Credit History (15 percent of your score) - This is also why it’s important to keep old credit cards open whenever you’ve paid the balance.
d. New Credit (10 percent of your score) - This involves opening new accounts and having credit card companies and other entities check your credit, which can damage your score depending upon the frequency.
e. Types of Credit Used (10 percent of your score) - The scoring system rewards consumers with multiple forms of credit, from several credit cards to mortgages, car loans and other consumer finance accounts.
6. Find a realtor well versed in VA loans process. Take this to heart, this is an important investment.
7. Above all, be patient.
1. Certificate of Eligibility (COE) - make sure you have this. You will be required in most cases to provide a copy your DD-214
2. Debt to Income Ratio(DTI) - the calculation that looks at your monthly debt payments compared to your income. By dividing all of your monthly liabilities by your gross monthly income, they come up with a percentage. This figure is known as your DTI, and must fall under a certain percent in order to qualify for a mortgage. The maximum debt-to-income ratio will vary by mortgage lender, loan program, and investor, but the number generally ranges between 40-50%. For VA purposes keep it below 41%.
Let’s look at a basic example of debt-to-income ratio:
$120,000 annual gross income as reported on your tax returns/pay stubs
Monthly liabilities: $3,500
Monthly gross income: $10,000
35% debt-to-income ratio
In this example, your debt-to-income ratio would be 35% ($3,500/$10,000).
However, the debt-to-income ratio goes into greater detail and comes up with two separate percentages, one for all of your monthly liabilities divided by income (back-end DTI ratio), and one for just your proposed monthly housing payment (including taxes and insurance) divided by income (front-end DTI ratio).
So in the above example, if your proposed monthly housing payment makes up $2,000 of your $3,500 in monthly liabilities, your front-end DTI ratio would be 20%, and your back-end DTI ratio would be 35%. Many banks and lenders require both numbers to fall under a certain percentage, though the back-end DTI ratio is more important.
You may see a debt-to-income requirement of say 30/45. Using the example from above, your front-end DTI ratio of 20% would be 10% below the 30% limit, and your back-end DTI ratio of 35% would also have 10% clearance, allowing you to qualify for the loan program, at least as far as income is concerned. However, if your loan is manually underwritten then the maximum debt-to-income ratio is 41% (back-end). There is no front-end requirement for VA loans.
3. Calculate your residual income - VA lenders calculate your residual income to make sure you have enough money left over each month for food, healthcare, and other family expenses. It’s an extra protection to ensure veterans have an affordable home buying option.
How to calculate it:
Your monthly gross income is _____
Spouse’s monthly gross income +
Subtract state and federal taxes/Social Sec Taxes* -
Net =
Subtract credit card, auto loan, & student loan payments -
Subtract estimated utilities (14 cents est per square foot based on home you wish to buy)-
Subtract childcare expenses/child support -
Subtract future mortgage payment, property taxes, homeowners insurance, and HOA dues**-
Estimated VA Residual Income =
(Residual income for Arizona for a family of 2 with a loan amount above $80K is $823.00)
As mentioned earlier, the VA is interested in the big-picture ratio, the back-end number. The VA uses a DTI benchmark of 41 percent, which is higher than what you’ll find with conventional and even FHA financing. **See VA Form 26-6393 Loan Analysis
http://benefits.va.gov/warms/pam26_7.asp
4. VA Funding fees - Generally, all Veterans using the VA Home Loan Guaranty benefit must pay a funding fee. This reduces the loan's cost to taxpayers considering that a VA loan requires no down payment and has no monthly mortgage insurance.
You do not have to pay the fee if you are a:
Veteran receiving VA compensation for a service-connected disability, OR
Veteran who would be entitled to receive compensation for a service-connected disability if you did not receive retirement or active duty pay, OR
Surviving spouse of a Veteran who died in service or from a service-connected disability
http://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp
5. Credit score - with VA the current standard is 620 score. In comparison, the average credit score on an FHA loan denial was 669 in May 2012, according to the National Association
of Realtors. Conventional lenders are looking for even higher credit scores. Borrowers with scores of at least 740 accounted for 53 percent of all loans in August 2011.
In general, credit scores are calculated using a complex web of factors, some 20 in all, broken down into five broad categories that are surprisingly simple and easy to understand.
a. Payment History (35 percent of your score) - The credit agencies have three classes of late payments: 30 days, 60 days and 90 days. On average, a 30-day late payment will knock 40
to 110 points off your score; a 90-day late payment will shave 70 to 135 points.
b. Credit Card Balances (30 percent of your score) - The scoring system looks at how
much you owe and the total amount of credit available to you. Generally, it’s best to keep balances at no more than 30 percent of the credit limit.
c. Credit History (15 percent of your score) - This is also why it’s important to keep old credit cards open whenever you’ve paid the balance.
d. New Credit (10 percent of your score) - This involves opening new accounts and having credit card companies and other entities check your credit, which can damage your score depending upon the frequency.
e. Types of Credit Used (10 percent of your score) - The scoring system rewards consumers with multiple forms of credit, from several credit cards to mortgages, car loans and other consumer finance accounts.
6. Find a realtor well versed in VA loans process. Take this to heart, this is an important investment.
7. Above all, be patient.
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Maj Diane Varni
Note the lender overlays DTI while VA actually uses RESIDUAL INCOME. That looks at how much after expenses you have based onnumber of family members. I actually think this is better to avoid being house poor.
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I can help you, I'm a VA lender in all 50 states. Email me, [login to see] or call, [login to see]
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