VA Loan Qualification
As you begin the process of looking for a new home and using your VA home loan benefit, you want to get an idea of how much you can afford. There are various online affordability calculators that you can use but it’s always best to speak directly with a loan officer with VA lending experience.
A loan officer will have a brief conversation with you regarding our current job, how long you’ve been there and how much money you make each month. You’ll also be asked to provide information on current monthly obligations you have regarding credit card or automobile payments. Information about the number of people in your household is also important to calculate what is called “residual” income, or the amount of funds you have available after all your bills are paid.
The loan officer will factor in current mortgage rates, estimated property taxes and homeowner’s insurance payment and calculate an amount that is no greater than 41 percent of your gross monthly income. This 41 percent is called your debt ratio and is arrived at by dividing your all your monthly obligations plus your proposed mortgage payment.
For example, say that your monthly income is $5,000 per month, before withholdings. 41 percent of $5,000 is $2,050 and is the maximum allowable amount for monthly payments. If the estimated property tax and insurance premium payments add up to $400 and you select a 30 year fixed rate loan program at 4.00 percent, your principal and interest payment would then be $1,650 per month for a qualified loan amount of nearly $350,000 and a total housing payment of $2,050.
But what’s important is not as much what you can qualify for but what you personally feel comfortable paying. For example, if you’re used to paying $1,000 per month for rent perhaps $2,050 seems way too high for you. The important takeaway is what you feel comfortable paying; not how much the loan officer says you can borrow.