If someone were to ask me what the best advice is for someone buying a home, I would have to say “educate yourself.” I realize that sounds vague, but there is SO MUCH information, more importantly, incorrect information, out there and every family situation is unique. I’m hard-pressed to say what is most important, but breaking barriers to getting started would be first. Unfortunately, I see a lot of myths repeated on a daily basis, sometimes from fellow mortgage professionals! I will continue to share digestible pieces of information, but first, need to get these common myths out of the way, so no military family is deterred from getting started:
There is no debt-to-income ratio cap.
The VA’s deciding factor on whether or not you can afford a loan is based on “residual income” (p.57), meaning how much money is left over every month after your debt obligations are met. This is a formula based on loan amount, geographic location and family size; it’s not always a one-size-fits-all answer. Some lenders have “overlays,” which are additional requirements that reach beyond what the VA themselves require, which is why the DTI myth is still floating around. The big takeaway here is that if you’re told by one lender your DTI is too high, they might have extra requirements on top of what the VA states, and you should SHOP AROUND! Not all lenders are created equal.
The VA has one residency requirement (pp.12-13), that you intend to make the home your primary residence and occupy “within a reasonable period of time” – usually deemed as 60 days. A spouse or dependent child can fulfill this residency requirement, but no other family member. I continuously see the myth of “one year,” circulated, but it is simply a myth. Last-minute moves and orders happen; the VA knows that, and according to their guidelines, you are not tied to live in any home for any period of time that doesn’t work for your family – period.
County loan limits still apply for multiples.
The Blue Water Navy Vietnam Veterans Act Sec.6(a)(1)(C)(ii) that went into effect January 2020 lifted the VA county loan cap for how much money you can borrow with down, but that’s only if you have full entitlement available. A borrower can have multiple VA loans out at once, but if any entitlement is currently used, the county loan limits DO apply for bonus entitlements. You may be subject to a downpayment requirement if you exceed your remaining entitlement available.
Work history – what counts?
I repeatedly see posts in social media about a service member transitioning, receiving a new job (or job offer), and they don’t think they can qualify for a loan until two years into the job. This is totally false! Military active duty counts towards work history. The VA allows future employment income to be counted if the lender can verify a non-contingent job offer, including start date and salary. Documented retirement and disability pay also count towards qualifying income, but GI bill benefits do not.
Social media can give instant access to other people’s experiences, but some of the answers to your VA loan questions can only be found in a licensed professional. Make sure you’re talking to a lender that is passionate about educating you and your family, allowing you to make smart financial decisions. Not all financial institutions lend “by-the-book,” so ask more than one lender if something doesn’t feel right, or you’re not satisfied with the answer. An ounce of prevention, in this case, is certainly worth well more than a pound of cure!