VA loans offer borrowers more ways to get qualified for a mortgage.
For instance, if a borrower has high debt to income ratios for meeting the official standards of VA loans, lenders could approve applications with the use of the residual income of the borrower instead.
The residual income, or commonly called discretionary income, is being calculated through comparing the income of the mortgage borrower and his regular living expenses together with any applicable future housing costs.
VA-approved lenders can make the most out of the added cushion in the budget of the buyer to overlook weakness associated with DTI in order to give a mortgage approval.
Get the Most Out of VA Mortgage Benefits
For the past few years, VA loans have seen an increasing popularity.
The Department of Veterans Administration backed over 2.5 million home loans since the beginning of the decade in which yearly loan counts have more than doubled for the past couple of years,
This enthusiasm for the VA mortgages is not a big surprise.
If you have good credit scores, your VA mortgage rates could reach up to 40 basis points below the ones for comparable conventional loans. For borrowers with just average credit scores, this difference can go to as much as 100 basis points or more.
This is a big difference.
In addition, when it comes to VA loans, you can expect for lenient credit score requirements, and VA buyers don’t need to pay mortgage insurance whatever their down payment size might be.
Ways to Increase Residual Income
While some VA homebuyers can be qualified for residual income requirements, some will not. Good thing there are several ways to increase for improving your residual income levels for your loan to be approved:
- Go for a smaller home
- Lessen your monthly obligations
- Shop for lower mortgage rate
You might want to get several VA mortgage quotes to ensure that you will get a good rate. You can also pay discount points if this can further decrease your payment.
Posted by Randy Blakeslee
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