VA loan denied with a 780 credit score?

[Trish]

I'm super confused. How does someone with a mid score of 780 get denied for a home loan?
Only other debt is a cc with a 10k limit but 4k balance and a 6k car loan with a 5k balance. No late payments - and always pay ahead.
Income is 50k, however pays child support 1100 a month. 

Was told DTI was too high to qualify for anything. I'm baffled.

Would we be better off applying for a traditional loan instead of a VA loan?
Hoping to qualify for at least 180k

[MrChairman]

A credit score is only 1/2 the battle. DTI weighs just as much as credit score. Your going to have an uphill battle getting an approval unless you can put down 20%. You pay 13k a year in child support alone. Not including other bills and the future mortgage payment. I think it's fully justified the LO said your DTI is way too high. It's the child support payment that's killing you.

[Hoya08]

Unfortunately your DTI is way too high.  Going to an other lender may not be any better.

With ZERO car loan and cc balances, and with a 20% down payment ($36k) for a $180k home at 4.5% APR fixed for 30years, your back-end DTI would be around 44%!  Some lends may be flexible with this DTI, but can you get into this financial position? 

[MrChairman]

My DTI is 46% and has never been an issue. I'm going VA also. The mandatory child support is what is scaring lenders away from him.

[AVierra]

As a general rule, lenders will approve a DTI of 45%.  This means that your monthly required payments (those minimum payments on your credit report, plus your new house payment including principle+interest, taxes, insurance, plus your monthly child support) can be no more than 45% of your gross monthly income.

$50,000./12 x 45% = $1,875 available for all of the above.  Subtracting the $1,100 child support leaves only $775 to cover the remaining bills.  Don't know the other bills, but a payment on $180,000 purchase price ($0 down) with a Vet with no prior use of VA and no service-connected disability is $931.  Just too many bills and/or not enough income.

Additionally, VA uses a calculation for residual income that takes into account expected taxes, cost for running the home, etc.  They want to make sure that the Vet has enough $$ to live comfortably.  Unfortunately, it doesn't look like it works in this case.  Sorry.

[Hoya08]

OP's child support payments are definitely affecting his approvals, but I disagree it's the factor scaring away lenders.

His "complete" financial situation (assuming his monthly payments for CC and car are $80 and $150 respectively) is scaring away lenders.  His back-end DTI is around 55%; 55% is risky.  If his back-end DTI w/ child support was around 40%-44% (due to an increase in income, a decrease in debts, or a combinatino of both), OP may have better luck finding a lender.

[MrChairman]

Vierra,

The residual income calculation only comes into play if the DTI is too high. In this case it would. The numbers would have to work with DTI or residual and in this case neither combination will work.

[Trish]

Ok, since it appears that the credit score plays less of a role in things with the VA. Do you think adding someone onto the loan with a low dti ratio, but a low 620 credit score would allow them to qualify for the 180k? 

2nd income would be 30k. No cc debt no car debt. Student loan payments 68/mo and bk 3 years ago.

[Elcid89]

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@Trish wrote:

Ok, since it appears that the credit score plays less of a role in things with the VA. Do you think adding someone onto the loan with a low dti ratio, but a low 620 credit score would allow them to qualify for the 180k? 

2nd income would be 30k. No cc debt no car debt. Student loan payments 68/mo and bk 3 years ago.

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VA will only underwrite at 100% for two party mortgages where the parties are married or both parties are veterans.

Otherwise, you'll run into a situation where VA only partially guarantees, and you get hit with PMI.

For mortgages over $144,000, the maximum guarantee is the lesser of 25% of the mortgage amount or 25% of the Freddie Mac conforming loan limit (which changes yearly).

For a $200,000 mortgage where one party is a veteran and the other is not (nor a spouse), VA's guarantee amount gets cut in half - i.e. the lesser of 25% of half of the mortgage amount or 25% of half of the Freddie Mac conforming loan limit.

In that situation, the lender is going to mandate PMI, so you will probably find that your net payment would actually increase for the same mortgage on the same property. Doubtful that it would help you.

Honestly, you need to focus on paying down debt before you go for a mortgage. You simply owe too much, IMO.

[Sunshine85]

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@Elcid89 wrote:

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@Trish wrote:

Ok, since it appears that the credit score plays less of a role in things with the VA. Do you think adding someone onto the loan with a low dti ratio, but a low 620 credit score would allow them to qualify for the 180k? 

2nd income would be 30k. No cc debt no car debt. Student loan payments 68/mo and bk 3 years ago.

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VA will only underwrite at 100% for two party mortgages where the parties are married or both parties are veterans.

Otherwise, you'll run into a situation where VA only partially guarantees, and you get hit with PMI.

For mortgages over $144,000, the maximum guarantee is the lesser of 25% of the mortgage amount or 25% of the Freddie Mac conforming loan limit (which changes yearly).

For a $200,000 mortgage where one party is a veteran and the other is not (nor a spouse), VA's guarantee amount gets cut in half - i.e. the lesser of 25% of half of the mortgage amount or 25% of half of the Freddie Mac conforming loan limit.

In that situation, the lender is going to mandate PMI, so you will probably find that your net payment would actually increase for the same mortgage on the same property. Doubtful that it would help you.

Honestly, you need to focus on paying down debt before you go for a mortgage. You simply owe too much, IMO.

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Actually, that's not true. The OP only has $9k in debt on a $50k salary. The $1100/month in child support is what's impacting their DTI.