If you are a veteran that is eligible for the VA loan, you have flexible underwriting guidelines at your disposal. You can qualify for 100% financing and even have fair credit and a high debt ratio.
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But what if you have GI Bill assistance as a part of your income? Is the VA still flexible?
The Exception to the Rule
VA lenders and the VA itself are lenient about just about every aspect of the VA loan except when it comes to
determining your income. They want your income to be stable and reliable. This means that you can prove that it will continue for the foreseeable future. Unfortunately, GI Bill Assistance isn’t long-term income, so it could make it difficult to qualify for a VA loan.
So what happens with your GI Bill Assistance income? If you can’t prove that it will continue for 36 months you can’t use it for qualifying purposes. You can only use the income that you can prove will continue for the foreseeable future. Think of it like
disability income or child support. You wouldn’t be able to use either of these types of income if you don’t have proof of their continuance for the next 3 years.
The GI Bill Rule
GI Bill Assistance isn’t money to help you buy new things. Instead, it’s meant to help you afford what you have now. The point of the Bill is to help you stay in your home while you go to school. It’s not to help you buy a new home, but to be able to stay where you are now.
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How to Qualify for the VA Loan
Just because you have GI Bill Assistance doesn’t mean you won’t qualify for a VA loan, though. You just have to prove that you qualify for it with other types of income, such as the income from your job. The good news is that the VA loan has the most flexible underwriting guidelines making it easy for many veterans to qualify.
Here’s’ what you can expect:
- You should have a minimum 620 credit score
- You can have a maximum debt ratio between 41% and 43% depending on the lender
- You need enough disposable income to cover your family’s expenses based on where you live
- You need stable income and employment
- You can’t have a bankruptcy or foreclosure in your recent past
- You need enough entitlement to get the loan
If you can make your debt ratio and disposable income requirements work with your income from your job, you may still qualify for the VA loan. The VA doesn’t allow lenders to include the
GI Bill income because it would only inflate the amount of loan that you could afford. Because the income isn’t permanent, though, you might be unable to afford it, which puts the lender and the VA at risk of default.
The most important thing that you can do to increase your chances of qualifying for a VA loan with GI Bill Assistance is to make sure that your income is steady and enough to cover your bills and the new mortgage while keeping your debt ratio lower than 43% of your gross monthly income. If your DTI is too high, you should consider either lowering your mortgage amount (finding a cheaper home) or finding a way to supplement your income that is more long-term, like a second job or a pay raise.
GI Bill Assistance won’t help your ability to secure a VA loan. In fact, it can only hurt your chances if you are including it in your total income when deciding how much you can afford. Before you apply for a loan, take the GI Bill income out of our total to determine how much you can truly afford so that you know how lenders will look at your loan as well.
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