You are now ready to use your Veterans Administration (VA) home loan benefit, but first, you need to understand how much you can qualify for. Your VA home benefit amount comes down to three key factors: (1) your eligibility as a current military service member, veteran or surviving spouse, (2) your employment and steady income, and (3) your debt.

Who Qualifies For a VA Loan?

The first course of action to getting a VA loan is to verify to your lender that you qualify for a VA-backed home loan based on both service history and duty status.  Those who have served for at least six years in the National Guard or Reserves qualify for a VA mortgage. Additionally, those who served for at least 90 consecutive days of active duty during wartime or 181 straight days during peacetime qualify for a VA loan. Surviving spouses of a deceased service member who died in the line of duty are also eligible for a VA home loan.

While a Certificate of Eligibility (COE) isn’t required to start the VA loan process, it will be necessary later down the road and is an excellent thing to have on hand.

There are other qualifying factors that will determine your VA home loan eligibility and benefit amount.

Your income and assets in the form of savings and retirement accounts are factors that will impact the VA lender’s decision to approve your loan request and the total amount that they may loan you. You must be able to show that your income is stable and expected to continue. Your credit history will be influential as well, though it does not need to be perfect. Lastly, your debt to income ratio will be a critical determining factor for your potential lender, as it will limit the amount you can borrow.

 

Keep in mind that while lenders abide by the VA Lender’s Handbook, their standards vary. Thus, you may expect different offers or meet specific requirements, depending upon the lender requirements. A VA home loan specialist will be able to help you with these important requirements.

VA Home Loan Amounts

An essential requirement for determining how much of a VA home loan you qualify for is a lower than 41% debt to income ratio. This number is significantly higher than the 36% debt to income ratio for conventional loans.  Your debt to income ratio represents how much of your monthly income is going to your debt obligations. The higher your debt ratio, the larger the lender’s risk, as clients typically have trouble paying beyond that threshold. Thus, the 41% ratio is the highest a borrower in the VA home loan program can have.

You can calculate your debt to income ratio by dividing debts by gross monthly incomes. This debt includes your mortgage payment, car loan, student loans, credit card payments, child support, and more. Think big picture debt here, not smaller monthly bills like your electricity or water, though it will vary from state to state.

Your loan officer will use this information to calculate the maximum amount you will have to be able to cover your future mortgage payment, including any interest, property tax, insurance, and homeowner’s fees that may be required.

A VA Home Loan Debt to Income Example

As an example, let’s say that your monthly income is $5,000. Your debts cannot be more than 41% of this, in this case— $2,050. Your loan officer will then factor in any qualifying debt, which may bring this number down. For example, you have a car loan that you pay on monthly, which comes to $300. Reduce that from $2,050, and you have $1,750 as the maximum amount you’ll have for the mortgage payment, interest, yearly taxes, home insurance, and any other required monthly fees.

The loan officer will then apply the number of years of the mortgage with the loan’s fixed rate and interest to determine your maximum VA-guaranteed loan amount.

 

Obtaining Your VA Home Loan Benefit

If you fulfill the qualifying requirements and have the debt to income ratio that you need, you will be well on your way to applying for and obtaining a VA-guaranteed home loan. The government-backed guarantee will be generous, but it will ultimately come down to the loan’s size and the area you are purchasing in. Regardless of the full loan amount, you can expect to have 25% of the loan to be government-backed. This is a significant benefit for the future homeowner as lenders look favorably upon this backing. It is important to note that there is a threshold of $417,000. If the home you are purchasing exceeds this 25% threshold, you may have to account for a portion of the down payment to make up the difference.

Also, consider that even if you qualify for, say, $250,000, you do not have to accept that loan amount in full. Carefully evaluate your lifestyle and the realistic amount you will need for a home purchase. There are affordability calculators online that are great references to determine your loan pre-approval amounts based on your current income and debts. Ensure you understand your options and discuss them in full with your representative.

Choosing Your VA Home Loan Representative

Most conventional home loan lenders offer VA home loans as well, but choosing who to apply with isn’t always an easy option. That’s where Hero Home Programs come in. Their goal is to see all eligible servicemen and women, past and present, achieve homeownership. They leverage their VA home loan expertise and industry knowledge to set their clients up with the best lenders for their unique situation.

 

They understand your state requirements and will work to find local grants, rebates, and opportunities that will save you time and money on your home purchase.  Large lending companies can’t offer the personable and customizable solutions that the Hero Home Progams specialists are able to. Your assigned specialist does the hard work for you so you can enjoy the home buying process without being overwhelmed, stressed, or confused.

 

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