VA Loan Borrowing Power

For VA borrowers, there’s an important factor that affects debt to income ratios used to calculate your VA home loan or refinance loan. How much you bring in every month compared to how much is paid out is a big factor in your borrowing power. But when the lender examines your current income, is he or she taking into account how that income might change with your next military promotion, pay raise, or cost of living increase?

If your military career has you moving from your current rank to a higher one, the pay raise should be considered as a factor when applying for the VA loan. If your promotion is six months away or less, your lender should know about this as it could be used as a compensating factor in loan approval.

And promotions aren’t always “vertical”. Are you moving out of the enlisted ranks into an officer’s commission? There is a major pay raise that comes as a result of such a move, and it’s one your lender should definitely think about using this as a compensating factor with certain restrictions. If the pay raise won’t come within a certain time frame based on lender standards, it may be worth waiting to apply for a new VA loan until after the promotion has occurred.

Borrowers who are due to get special military pay and allowances may also have an advantage--if you are taking language proficiency exam, for example, the added income for those who qualify may be used as part of the applicant’s verifiable income. That is something you should definitely speak to your loan officer about. Not all special pay or benefits qualify, but the ones that do can definitely help you get closer to VA loan approval.

Talk to a loan officer about your options in these areas--no two lenders have exactly the same standards and you may find one willing to work with your circumstances.

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