Reader Question: Do I Qualify for a VA Loan?

I received this question on a comment and thought I’d share my response via a post.

Happy New Year,
I am contemplating a return to the Tri Cities and would like to utilize my VA 0 down loan in the amount of $250,000 or less. My income is based of a civil service pension, social security and VA disability.  The total gross amount I currently receive is $4,400 monthly.   Am i going to be able to qualify for the VA  (or any other)loan?

Thanks in advance,

VA’s standard guidelines allow for a debt to income ratio of 41%.  This means that Greg’s total monthly mortgage payment and monthly debts should not exceed 41%. 

41% of $4400 is $1804. VA guidelines would probably allow $1804 for total proposed mortgage payment and monthly debts.

The current mortgage payment for a $250,000 zero down VA purchase would be roughly $1422 (including taxes estimated at $260.50 and insurance at $50 per month).  

This is based on rates as of 3:00 pm on January 3, 2012 of 3.250% (apr 3.430) for a 30 year fixed VA loan based on credit scores of 720 or higher. 

The proposed mortgage payment of $1422 less the $1804 allowed monthly debt (for the 41% debt to income ratio) leaves around $382 per month for other possible monthly debts (car loans, student loans,  credit cards, child support, etc.).

So if Greg has less than $382 per month in other debts, he would qualify for a $250,000 home (also assuming taxes and insurance are around what I’ve estimated).

BUT WAIT… there’s more…

If Greg’s social security income may be able to be grossed up by 15%, which would allow him to have a little more “wiggle room” with the amount of monthly debt.

In addition, if he is a disabled veteran, he may qualify to be exempt from the VA funding fee which would  also reduce his payment by about $23.00 (apr 3.261).  This would allow for $400 in monthly debt (not including if the social security income is able to be grossed up) with Greg qualifying for a $250,000 home in the Tri Cities.

If you are interested in applying for a VA, FHA or conventional loan for a home anywhere in Washington state, please click here.