Know Your Qualified VA Loan Value Before Applying For One
When considering to buy a home, and you are a veteran or a serving member of the U.S. Army, VA Loan may sound the best option. And it is indeed, but do you know if you are eligible for one?
Moreover, if you are eligible for a VA Loan, do you know the amount of loan that you qualify for?
Knowing your qualification status before applying for a VA Loan can actually improve your chances of securing the loan to its maximum potential. Additionally, you get to proceed with your home buying exercise with minimal stress.
Let us understand, what affects your loan qualification.
The Debt to Income Ratio
An important factor that affects your VA loan value is the ratio of the debts you already owe to your monthly gross income. Often known as VA Debt Ratio, a higher ratio may lead to disapproval of a higher amount of loan.
It is noteworthy that the debt ratio does not leave you ineligible for a loan, but only reduces your loan value. For example, if your monthly bills and other loans sum up to $1500 per month, and your monthly gross income is around $5000, then the ratio comes out to be 30. Typically, a debt ratio of up to 40 is the maximum limit, thus qualifying you for a loan in this example.
What Is The Maximum Amount Of Loan You Qualify For?
A loan officer considers your monthly income and your monthly expenses, including your debts, to figure out a tentative maximum amount of loan that you qualify for. Typically, as already mentioned the maximum limit for VA Debt ratio is 40, your lender would consider the gap between your current VA Debt ratio and the maximum limit to propose your maximum eligibility.
Bruce Glassinger of VAloanlending.com warns that using a broker that charges an origination fee will actually increase your APR. So, this is another point that you need to focus on. You wouldn’t wish to be paying a higher monthly installment when you could have opted for a lower EMI option.
It is noteworthy to mention that there is another limitation posed by the VA Department. Although you can apply for as much loan amount as you want, the VA only backs about 25% of your total loan amount. Apart from this, there is also a maximum spend limit, subjective to the borrower, that decides the threshold for VA backed amount.
Other Factors Also Affect Your Loan Qualification
Your debt to income ratio is just one of the parameters your lender considers to approve your VA Loan request. Apart from this, there are many other factors that affect the overall qualification of your loan application. For example, the steadiness of your income, your credit history, your savings and other collaterals that you own. Having said that, these factors can not forfeit your application totally, but can still affect the amount you qualify for.
Nevertheless, knowing your maximum qualified loan amount can help you prepare a budget when you go house hunting. You would preferably wish to use your eligibility to the maximum potential, but it would be best to go easy on your finances.