Though obtaining a VA loan is one of the easiest ways for veterans to secure their dream home in Texas and elsewhere in the US, some applications don’t go through. The reason is that some veteran applicants fall short of the qualifying requirements laid by the Department of Veteran Affairs. From a typo in the loan paperwork to misrepresentation of facts in the loan application, there can be several other reasons for the rejection of your VA loan application. To make sure your VA loan application is not rejected it is important to first know about the possible roadblocks in obtaining a VA loan. Continuing the discussion, the blog post discusses five hurdles you should know about before applying for a VA loan in Texas and elsewhere in the US.
1. Low Income
The Department of Veteran Affairs require the applicants to have the “minimum residual income” to qualify for a VA loan in Texas and elsewhere. The minimum residual income, as the name suggests, is the amount left after incurring monthly expenses and the limit differs across states. Income is kept as one of the parameters to assess VA loan suitability, just to make sure the applicant has the financial bandwidth to comfortably pay monthly mortgages after getting done with fixed monthly expenses.
2. Low Property Appraisal
Qualified VA appraisers conduct property appraisal to determine the “fair market value” of the property before deciding an appropriate loan amount. Simply put, the VA appraisal is an assessment of the property’s value and habitable conditions. Though the appraisal process is a win-win proposition for the lender and the loan applicant, it can impact the loan amount if the property comes out to be undervalued. Most VA lenders are willing to sanction a loan amount equivalent to the “appraised value” and not the one quoted by the seller.
3. Bad Credit Score
Though the VA loan program has no minimum credit score requirements to apply, applicants shouldn’t underestimate the value of a sound credit score. The VA loan program is federally backed; however, the government needs to protect the interests of both the lender and borrower. That said, you should focus on improving your credit score before even thinking about applying for a VA loan in Texas. Most lenders prefer a 620 credit score; however, it doesn’t mean that securing a VA loan is impossible beyond 620. Improve the credit score as much as you can to increase the odds of securing VA finance in one go.
4. Unacceptable Property Purpose
If you are thinking to buy a holiday home for staying once in a while, the VA loan is probably not the option. You can secure a VA loan to buy a property in Texas or elsewhere in the US, provided it’s going to be your primary residence. Remember that you can still rent a portion of your primary residence as it’s not against the VA guidelines, however, VA loans can’t be used to finance holiday homes or rental properties.
5. High Debt-to-Income Ratio
If your monthly income is already tied up in other debts, it may hamper your chances of getting a VA loan approval. VA lenders give weightage to an individual’s debt-to-income ratio for assessing suitability. The best way to solve this problem is to wait until a debt is completely paid off before applying for a mortgage or better, try consolidating the debt to the loan amount to reduce the size of monthly payments. You can also find a co-borrower to get away with a high debt-to-income ratio.
The VA loan program has several guidelines, and therefore, it’s essential to get acquainted with the process before applying for a loan. The roadblocks mentioned in this post are avoidable, if you do your homework to fulfill the eligibility criteria. Spend some time researching the intricacies of the program, or even better, seek professional assistance from a reputable mortgage firm to increase the odds of getting your loan application accepted.