VA Maximum DTI Guidelines On VA Home Mortgages

This Article Is About The VA Maximum DTI Guidelines On VA Home Mortgages

All government and conventional loan programs have minimum credit score requirements and debt to income ratio requirements with the exception of VA Mortgages. VA loans have lenient agency mortgage guidelines. The U.S. government realizes veterans have lower credit profiles than their civilian counterparts due to getting transferred and/or deployed. There is no mortgage insurance on VA loans. The waiting period after bankruptcy is only two years versus HUD’s three-year waiting period requirement on FHA loans. Mortgage rates on VA loans are lower than conventional loans.

The Department of Veterans Affairs (The VA) created and launched VA loans to reward the men and women of the United States Armed Services who have served our country. The VA realizes that service members often have lower credit profiles than their civilian counterparts. This holds true especially when they are deployed overseas. Members of the Armed Services also need to sacrifice being stable in one location. They often get transferred to another city and/or state every few years.

Due to the sacrifices men and women of the Military make in serving our country, the VA offers VA loan to eligible active duty and/or retired members of the U.S. Armed Forces. Eligible spouses of deceased eligible veterans may also qualify for VA loans. The Veterans Administration has no VA Maximum DTI Requirements with an approve/eligible per automated underwriting system (AUS).

In this blog, we will discuss VA Maximum DTI Guidelines and qualifying for VA Loans with high debt to income ratios.

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VA Eligibility Requirements

Below are the minimum VA Eligibility Requirements on VA Home Loans:

No down payment is required with 100% financing
Up to 4% in sellers concessions by home sellers allowed for home buyer’s closing costs
If a borrower is short in covering closing costs with sellers concessions, the lender can offer a lender credit for the shortage in lieu of a higher mortgage interest rate
There are no minimum credit score requirements on VA Loans with an approve/eligible per AUS
Per VA Maximum DTI Guidelines, the VA does not have a maximum debt to income ratio requirement on VA Loans with an approve/eligible per AUS
There is a two year waiting period after Chapter 7 Bankruptcy, foreclosure, deed in lieu of foreclosure, short sale to qualify for VA Loans
Borrowers in Chapter 13 Bankruptcy Repayment Plan can qualify for VA Loans via manual underwriting with Trustee Approval after making 12 monthly payments
Chapter 13 Bankruptcy does not have to be discharged as long as they are making timely scheduled payments to the Bankruptcy Trustee
There is no waiting period after the Chapter 13 Bankruptcy discharged date to qualify for VA Mortgages
Any Chapter 13 Bankruptcy that has not been seasoned for 24 months after the discharge needs to be manually underwritten
VA Manual Underwriting Guidelines Apply

In this blog, we will be covering the VA credit and DTI guidelines for VA home loans. Per VA Credit Score And DTI Guidelines, there are no minimum credit score requirements. Also, per VA Credit Score And DTI Guidelines, there are no maximum debt-to-income ratio requirements. As long as borrowers can get approve/eligible per the automated underwriting system, borrowers can qualify for VA Loans with a lender with no overlays.

Most lenders have overlays on VA Loans. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on VA loans. As long as borrowers get an automated underwriting system approval and can meet the conditions of AUS, our borrowers will close their VA loans.

VA Credit Score And DTI Guidelines And Requirements

Here are the general VA Lending Guidelines:

No down payment required
100% financing on VA Home Loans
No monthly mortgage insurance required
No minimum credit score with AUS Approval
No maximum debt-to-income ratio requirements with AUS Approval
Gustan Cho Associates recently closed a VA Loan for a borrower with 504 FICO and 64% debt-to-income-ratio
Minimum credit score requirements are set by individual lenders as part of their overlay
Maximum DTI caps are set by individual lenders as part of their overlays
Gustan Cho Associates has zero overlays on VA Loans

There are no maximum loan limits on VA loans. There are 220 counties in the United States where VA loans are considered high-cost areas. The 220 counties are classified as high-cost areas that have higher home values than traditional areas.

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Who Can Qualify For VA Loans

The United States Department of Veterans Affairs is the federal agency that insures and guarantees VA Loans originated and funded by lenders. VA is not a lender. It acts as a federal agency that partially insures loans to lenders who follow VA Guidelines on VA Loans. This is why private lenders can offer veterans with a VA certificate of eligibility (COE) 100% financing at great mortgage rates. COE is also known as DD214.

What Are The Service Requirements For a VA Loan?

To be eligible for VA loans, there are general service duty requirements mandated by VA. To be eligible for VA loans, you need to be active-duty and retired members of the U.S. Military with valid Certificate o.f Eligibility.

Need to serve at least 90 days of consecutive active duty service. Members in the reserves and/or National Guard, need 6 years of service. 181 days of active duty during peacetime. Only members with an honorable discharge are eligible for VA loans.

VA Debt To Income Ratio Guidelines Versus Lender Overlays

Many borrowers are often told by lenders that the debt-to-income ratio to qualify for VA Loans is 620 to 640. This is the particular lender’s requirements and not VA Guidelines. VA does not have any limits on debt-to-income ratios. Typically, lenders may limit DTI from 41% to 50%. Gustan Cho Associates has no lender overlays on VA Loans. We recently closed a borrower with a 65% debt-to-income ratio. The automated underwriting system will analyze the borrower’s overall credit and income profile and render an automated approval.

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What Is The VA Funding Fee?

VA does not have an annual mortgage insurance premium.

VA Loans have VA Funding Fee which is similar to the upfront FHA Mortgage Insurance Premium. Below is the VA Funding Fee Chart for 2021:

VA Funding Fee Chart for 2021:

Type of Veteran	Down Payment	Percentage for First Time Use	Percentage for Subsequent Use
Regular Military	0% – 4.99% 5% – 9.99% 10% or more	2.15% 1.50% 1.25%	3.30% † 1.50% 1.25%
Reserves/National Guard	0% – 4.99% 5% – 9.99% 10% or more	2.40% 1.75% 1.50%	3.30% † 1.75% 1.50%

VA Fund Fee Refinance Chart on Rate and Term and Cash-Out Refinance

VA Funding Fee Refinance Chart On Rate/Term or Cash/Out

Type of Veteran	Percentage for First Time Use	Percentage for Subsequent Use
Regular Military	2.15%	3.3% †
Reserves/National Guard	2.4%	3.3% †

VA Funding Fee Refinance Chart on IRRRLs

VA Funding Fee Refinance Chart on IRRRL’S

Type of Loan	The Percentage for Either Type of Veteran Whether First Time of Subsequent Use
Interest Rate Reduction Refinancing	0.50%

VA Credit Score And DTI Guidelines: Cash-Out Refinance

VA is the only loan program that allows homeowners to do a 90% loan-to-value cash-out refinance. Homeowners can use the cash-out proceeds for whatever need.

Refinance rates on cash-out refinance VA mortgages are higher than rate and term refinances. VA cash-out refinances are full credit/income mortgage loans. A new appraisal is required.

VA Interest Rate Reduction Refinance Loans

VA Interest Rate Reduction Refinance Loan also referred to as IRRRL, allows homeowners to refinance their current VA Loan into another VA Loan with lower rates. It is a streamlined mortgage process. No income documentation is required. No home appraisal is required. No late payments on their VA loan in the past 12 months.

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VA Maximum DTI Guidelines On Manual Underwriting Versus AUS Approval

As mentioned earlier, the Department of Veterans Affairs (The VA) has no maximum debt to income ratio requirements on automated underwriting system approvals. The VA also has no minimum credit score requirements. Gustan Cho Associates is a mortgage company licensed in multiple states with no lender overlays on VA loans. We recently closed a VA Loans with a 583 FICO credit score and 60% DTI. Gustan Cho Associates have closed VA Loans with over 60% DTI. Residual Income is key in getting an approve/eligible per AUS for borrowers with higher DTI. However, VA Maximum DTI Guidelines on manual underwriting is normally capped to 50% DTI.

Mortgage Underwriters have a lot of underwriter discretion on manual underwriting. Gustan Cho Associates can probably go as high as 54% DTI on manual underwriting with compensating factors. Compensating Factors are very important in manual underwriting. If you have any questions on this blog and/or other mortgage topics, please contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com. Gustan Cho Associates Mortgage Group is available 7 days a week, evenings, weekends, and holidays.