Qualifying for a Colorado VA Mortgage
Eligibility for a VA loan is required, but does not guarantee that you are qualified for a VA mortgage. Loan approval is based on the five factors evaluated with a VA loan. In addition to the standard four factors evaluated with nearly every mortgage, VA also evaluates something called residual income.
Debt-to-income ratios
Ratios are looked at slightly differently for VA loans. A single back-end ratio is evaluated with the VA, with the guideline set at 41%. VA adds a reserve calculation which evaluates a more complete list of monthly financial obligations, then calculates how much money is left over after also making the proposed total mortgage payment. Talk with your mortgage consultant to understand how this calculation would be run based on your situation.
Income
A two year work history is required. Income from a co-borrower is allowed but only if the co-borrower is married to the veteran. Use the guidelines for FHA income as a good rule of thumb for VA.
Assets
Since VA is a zero down solution, the only assets that may be required to be verified are those to cover closing costs and prepaids. View a discussion of how you can avoid paying for these costs as part of your cash to close. Use the FHA guidelines for acceptable source of funds as a good rule of thumb for VA.
Credit
Traditional (official credit report) and nontraditional credit (a credit report established through documenting your timely payments on such monthly debts as your telephone, utility, and insurance bills) are acceptable to VA. Bankruptcy: More than two years, with good credit in the meantime is fine. Less than two years, but more than one, with good credit in the meantime, and an acceptable reason beyond your control (medical, for example) may be possible, less than one year is not an option. A check of a national database (completed by the lender) to confirm that you have no outstanding debts or obligations with the federal government is required as part of getting a VA home loan.
For additional guidelines, see the FHA credit guidelines here as a good rule of thumb for VA, though there are VA specific guidelines for some of these rules. Please talk with your mortgage consultant for more details.
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