How Much Can I Afford with a VA Home Loan?
Find out how much you can afford with a VA home loan. We’ll show you how to get a pre-approval letter and calculate your monthly payments.
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If you’re a veteran or active duty military member, you may be eligible for a VA home loan. But how much can you actually afford with a VA loan?
VA loans are unique in that they offer 100% financing, which means you can buy a home with no money down. But just because you can doesn’t mean you should. You still need to be able to make your monthly loan payments, after all.
There are a number of factors to consider when trying to determine how much house you can afford with a VA loan. These include your income, debts, and the type of home you’re interested in purchasing.
Income: Obviously, the more money you make, the more house you can afford. But there’s more to it than that. lenders will also look at your employment history and stability when determining how much they’re willing to lend you. If you have a steady job and income, you’ll likely be able to borrow more than someone who is self-employed or has a history of job-hopping.
Debts: Your monthly debt payments (including things like credit cards, car loans, student loans, etc.) will also be factored into how much house you can afford. Lenders want to see that your monthly housing payment will leave enough room for all of your other debts – and then some. They typically recommend that your total monthly debt payments should not exceed 36% of your gross monthly income (this is known as your “debt-to-income ratio”).
Home price: The price of the home itself will also play a role in how much house you can afford with a VA loan. In general, lenders are looking for a home that’s priced at or below its appraised value – anything above that may be considered too risky for them to finance. Keep in mind, too, that the larger the loan amount, the higher the interest rate is likely to be.
How Much Home Can I Afford?
It’s important to know how much home you can afford before you start the house-hunting and mortgage application process. Chapter 4 of “the Lender’s Handbook” (VA Pamphlet 26-7), available on the Department of Veterans Affairs website, provides detailed information on how to calculate a veteran’s maximum affordable loan amount.
There are a number of factors that go into the calculation, including
– The type of loan (e.g., fixed-rate or adjustable-rate)
– The term of the loan
– The veteran’s service history (e.g., regular or Reserve/National Guard)
– The veteran’s credit history
– The amount of the veteran’s other monthly debts (e.g., credit card, car loan, student loans)
Generally speaking, a veteran can afford a home that costs up to four times his or her annual income. This is known as the “41% rule.” But this rule isn’t set in stone – it’s just a guide that helps veterans assess how much home they can comfortably afford without putting themselves in a financial bind.
How Much Should I Borrow?
When considering a VA home loan, one of the first questions many veterans ask is: How much can I borrow? The answer isn’t always clear cut, but there are a few things anyone considering a VA loan should know about the program’s lending limits.
For starters, all VA loans come with what’s called a “basic entitlement.” This is themaximum amount the Department of Veterans Affairs is willing to back in case of default. For most veterans, the basic entitlement is $36,000. In certain high-cost areas, the basic entitlement may be as high as $68,000.
In addition to the basic entitlement, the VA also offers what’s called a “bonus entitlement.” The bonus entitlement can be used to buy a home above and beyond the basic limit. In most cases, the bonus entitlement is equal to 25% of the Freddie Mac conforming loan limit for the county in which the property is located. This means that in most counties, veterans can use their VA loan benefits to buy a home up to $625,500 with no down payment.
There are also special rules for certain types of properties that allow veterans to exceed these limits. These include multigenerational homes, certain types of condominiums and manufactured homes.
In addition to these limits on how much you can borrow, it’s important to remember that your income and debts will also play a role in how much you can afford to borrow for your VA home loan. When considering how much you can afford to borrow, it’s important to work with a lender who understands both the ins and outs of the VA loan program and your unique financial situation.
How Much Will My Payments Be?
Assuming you have a full entitlement available, you can borrow up to $424,100 on a fixed-rate loan for 15, 20, 25 or 30 year terms*. The maximum borrowing limit increases to $636,150 in high-cost areas. But just because you qualify for the loan, doesn’t mean you can afford the monthly payments. That’s where we come in.
The best way to buy within your VA Loan limits is by using our VA Mortgage calculator to calculate estimated monthly payments with various interest rates and loan amounts. Just enter your information into the fields below and click “Calculate”. You can also use this tool to see how much house you can afford with a given monthly payment by changing the “How Much Can I Afford per Month” field.*
*Your maximum entitlement is the amount of loan guarantee available from the VA. The actual amount you can borrow will be determined by lenders based on your credit history, employment history and other factors.
Can I Get a VA Home Loan with Bad Credit?
The answer to this question is “it depends.” While the VA does not have a minimum credit score requirement, lenders who offer VA home loans may have their own minimum credit score requirements. In general, most lenders will want to see a credit score of at least 620 before they will approve a VA home loan. However, there are some lenders who may be willing to work with borrowers who have lower credit scores.
If you have bad credit and are hoping to get a VA home loan, your best bet is to work with a lender who specializes in VA loans. These lenders will be more familiar with the process and may be more willing to work with borrowers who have lower credit scores.
How Do I Apply for a VA Home Loan?
Applying for a VA home loan is a multi-step process. The first step is to get in touch with a VA-approved lender, like Veterans United Home Loans. We’ll work with you to get your Certificate of Eligibility, which proves to sellers and real estate agents that you qualify for the VA loan benefit. From there, we’ll help you gather all the necessary documentation for your loan application.
Once you have all of your paperwork in order, we’ll work with you to complete the loan application and help you submit it to a VA-approved lender. After the lender has received and reviewed your application, they will provide you with a loan decision. If they approve your loan, they will send us a “commitment letter” outlining the terms of your loan.
Once we have received the commitment letter, we will work with you to schedule a closing date. On closing day, you will sign all of the final paperwork and officially become the owner of your new home!
Your maximum loan amount is $484,350. You could make a down payment as low as $0 and not pay any mortgage insurance.