If you’re a “first timer” getting ready to use your VA home loan benefit to buy and finance your first home, you’re in for a rather exciting adventure. Owning your own home is indeed part of the American Dream and the VA loan program is the absolute best choice for those wanting to put little or nothing down. And one of the first things you’ll soon find out is how much you can qualify for. You get that information after speaking with a qualified loan officer experienced with VA home loans.
Your qualification amount is based upon a variety of factors including current market rates, gross monthly income and any existing credit obligations among others. Yet many first time home buyers are actually surprised at how much they can borrow. Sometimes the amount is a little “over the top” and sometimes it’s just plain scary. How so?
Say that you’re fresh out of base housing and your housing costs were lower than what your civilian buddies pay. Or maybe you’re currently renting a home and your monthly rent is $1,500. Now say your gross monthly income is $5,000 and you have no debt with maybe a $150 credit card payment. Using a 30 year fixed rate of 4.25% and estimating for property taxes and insurance, you could qualify for a $365,000 house with nothing down and your total monthly payment would be around $2,250, quite higher than your current rent. Lenders have a term for that and it’s called “payment shock.” Anything greater than 150% of your current housing payment would cause more scrutiny.
But here’s the point—just because you are able to qualify for a certain amount doesn’t mean you’re obligated to do so. You will be the one writing the mortgage check each month so only borrow what you feel comfortable borrowing. If you feel better if your monthly payment were closer to $1,800 then tell your loan officer who will calculate the proper amount. Remember who’s the boss here—you are.