Help with secondary home with VA LOAN

[Anonymous]

So im looking into purchasing a second home with my VA Loan. However, I still owe 100k on primary residence. Currently, my COE shows i have used 36k of my entitlement. However, I know in TEXAS I have more I can pull from. I believe thge CLL in Texas is 510k and set to increase. So I would like some input on possibility of being approved.

Current monthly debt (Car,mortgage,etc) is about 3.2k

Current monthly income is  8k

Credit scores across all bureaus = 750+

Searching for a home in the 180k - 200k range.

I understand that my DTI may be on the high side. But i know the VA Loan doesnt have a neccessary cap. Eventually my current home will become a rental property, once I can get next one up to speed. Although, initially that income wont apply toward income on application. Any advice? 

[VALoanMaster]

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@Anonymous wrote:

So im looking into purchasing a second home with my VA Loan. However, I still owe 100k on primary residence. Currently, my COE shows i have used 36k of my entitlement. However, I know in TEXAS I have more I can pull from. I believe thge CLL in Texas is 510k and set to increase. So I would like some input on possibility of being approved.

Current monthly debt (Car,mortgage,etc) is about 3.2k

Current monthly income is  8k

Credit scores across all bureaus = 750+

Searching for a home in the 180k - 200k range.

I understand that my DTI may be on the high side. But i know the VA Loan doesnt have a neccessary cap. Eventually my current home will become a rental property, once I can get next one up to speed. Although, initially that income wont apply toward income on application. Any advice? 

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Hi @Anonymous,

The new conforming loan limit for most areas (including all of Texas)is $647,200.00.

That means your 2nd tier or bonus entitlement through VA will be as follows.

$647,200 X 25% = $161,800.

$161,800 - $36,000.00 (entitlement tied to your current VA loan) = $125,800.

$125,800 X 4 = $503,200. This is your max VA loan amount without putting money down.

Now let's say you want to buy a house at $550,000. Most people think you would need to put $46,800 down ($550,000 - $503,200) but that's not the case with VA. In the scenario above, you would only need 25% of the difference or $11,700 for your down payment.

We can count the rental income towards offsetting your existing mortgage payment so that will help with qualifying.

While it's true that VA does not have a cap on your debt to income ratios, they do have a minimum residual income requirement which is $441 per month for a single person and if your debt to income ratio is over 41%, the residual income requirement increases by 120%. 

[Anonymous]

Thanks for the info. As for the rental income, do I have to have to show proof of income? Of course I won't be transitioning right away.. maybe a month or two. Or can I use future income based off the areas pricing? If so that would help incredibly. 

when you mention the residual income, is that how much you have remaining after paying all debts. So 1200 or so? If that's the case, then I suppose I would still qualify. 

[VALoanMaster]

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@Anonymous wrote:

Thanks for the info. As for the rental income, do I have to have to show proof of income? Of course I won't be transitioning right away.. maybe a month or two. Or can I use future income based off the areas pricing? If so that would help incredibly. 

when you mention the residual income, is that how much you have remaining after paying all debts. So 1200 or so? If that's the case, then I suppose I would still qualify. 

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Yes, we can use the projected rental income to the extent that it offsets the mortgage payment. For example: If your mortgage payment is $1,000 per month but the rental markets indicate the home would rent for $2,000, we can only use $1,000 of the rental income to offset the mortgage payment.

Here are the VA guidelines:

When all or a portion of the borrower’s income is derived from rental income, documentation and verification of the income are necessary to determine the likelihood of continuance.
Verification of Rental Offset of the Property Occupied Prior to the New Home.

Obtain a copy of the rental agreement for the property, if any.
Analysis using Rental Offset of the Property Occupied Prior to the New Loan.
Use the prospective rental income only to offset the mortgage payment on the
rental property, and only if there is not an indication that the property will be
difficult to rent. This rental income may not be included in effective income.
Obtain a working knowledge of the local rental market. If there is not a lease
on the property, but the local rental market is very strong, the lender may still
consider the prospective rental income for offset purposes.

Yes, residual income what is left after all of your debts including, Federal and state income taxes, Social Security and maintenance and utilities for the home.

Does that make sense?