Do you qualify for a California VA loan right now? Do you know what it takes to qualify? California has one of the highest concentrations of Veterans throughout the country but many of them don’t even know that they are eligible for the VA loan program or don’t know what is needed to be qualified. It is very important to understand the basics first. What is the Debt to Income ratio and how high can it go? What are the FICO score requirements? What is Residual Income and how does it factor into qualifying for a VA loan? How long after a bankruptcy or foreclosure can you get a VA loan? What are the VA loan limits in your California county?
What is the Debt to Income ratio and how high can it go?
One of the primary calculations that VA lenders will look at when considering a potential borrower for a VA loan is the Debt to Income ratio. The debt to income ratio is a measurement that compares a Veteran’s monthly debt payments to their monthly gross income (before income taxes). The Department of Veterans affairs has set a guideline for VA lenders of 41% for the Debt to Income Ratio. It is still possible for a Veteran to qualify for a VA loan if their debt to income ratio exceeds that 41% mark, but additional scrutiny will be raised during the loan process. Most VA lenders will allow the Debt to Income ratio to be as high as 50%, while some will even go to 60%. If a VA lender tells you your Debt to Income ratio is too high, ask them what it is. Some lenders are more stringent than others.
What are the FICO score requirements?
The Department of Veterans Affairs doesn’t fund loans, but acts as an insurer for qualified lenders. Because of this, credit score requirements will vary from lender to lender. Many lenders have a minimum credit score requirement of 620, and some will approve a loan with an even lower credit score.(down to 580) If one lender won’t approve your loan request, it can be worth researching other lenders to see if you can find one that will approve your loan.
What is Residual Income and how does it factor into qualifying for a VA loan?
The residual income requirement is one of the reasons why the VA mortgage program is so successful. A veteran’s residual income is their remaining monthly income after they have fulfilled all of their current credit obligations. The VA has set different residual income requirements for veterans based on location and their family size. Residual income also has the ability to reduce the relevance of a veteran’s debt to income ratio. If a veteran’s debt to income ratio is above the 41% guideline, they can offset this if their residual income is 20% greater than the VA guideline.
How long after a bankruptcy or foreclosure before you can get a VA loan?
Foreclosures and bankruptcies are major financial events that many borrowers think will prevent them from getting a mortgage. However, with proper handling of these events and a little bit of effort put into credit repair, these hurdles that can be easily overcome. A Veteran can qualify for a VA loan 2 years after a bankruptcy has been discharged and 2 years after a foreclosure. It’s important to understand that applying for credit after a major credit event is the first step in restoring credit. And make sure to not have any late payments or derogatory credit after bankruptcy or foreclosure.
What are the VA loan limits for the California County I Live in?
Since home prices vary in different parts of the country and have risen since the beginning of the VA program, the VA has set county loan limits that dictate the maximum loan amount that a veteran can get without needing a down payment. In Orange and Los Angeles County’s, the VA county loan limit is $679,650. It is possible to get a VA loan that is above the county loan limit, which is known as a Jumbo VA loan. With a Jumbo VA loan a down payment equal to 25% of the different between the purchase price and the county loan limit is required.
Authored by Tim Storm, an California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial, NMLS 7706. My direct line is 949-640-3102. www.CaliforniaVALoanExpert.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.