Lenders set their own guidelines for loans based on their tolerance for risk. It’s the role of underwriting to make sure that a borrower meets a lender's guidelines. This includes ensuring qualification from a credit perspective. Let’s get into what that looks like at Rocket Mortgage. In the next couple of sections, we’ll also introduce a couple of terms you may not be familiar with. Most loans sent to the VA go through an automated government underwriting system. If you get approved by the algorithm without a human being involved, it’s termed “approve/eligible.” Rocket Mortgage requires clients to have at least a 580 median FICO® Score. If you qualify with a score between 580 and 619, you’ll have some strict requirements in terms of how high your house payment and overall debt load can be. The first thing we look at is your housing expense ratio, which is your mortgage payment – including taxes, insurance and (if applicable) homeowners association dues – divided by your gross monthly income expressed as a percentage. Mortgage Payment ∕ Gross Monthly Income = Housing Expense Ratio In no event can you spend more than 38% of your income before taxes on a house payment if you’re qualifying with a credit score below 620. In addition, we also look at your debt-to-income ratio (DTI). This is a ratio comparing your monthly payments for installment debt and minimum payments on revolving debt like credit cards to your gross monthly income. (Installment Debt + Revolving Debt) ∕ Gross Monthly Income = DTI If your credit score is below 640 with the down payment being less than 5%, we require an overall DTI, including your mortgage payment and all other debts, to be no higher than 45%. If your score is 620 or higher, we look solely at DTI. Your higher credit score may also give you access to more houses. Often, there is no specific qualifying DTI at credit scores above this level. Instead, the DTI you must meet is based on factors including both your credit score and down payment or existing equity. If for some reason the VA’s algorithm doesn’t approve you, you may still be able to get a loan under the “refer/eligible” route. These loans undergo the human scrutiny of manual underwriting. An underwriter will go through your documentation and see if you qualify. Borrowers that don’t qualify for automated approval are usually those with certain negative items in their credit history. This could include late mortgage payments, past bankruptcies or foreclosure. To qualify based on manual underwriting at Rocket Mortgage, you need a minimum median FICO® Score of 640 or higher. Your DTI can also be no higher than 45%. If you are refinancing, you have to leave at least 10% equity in the home. While the VA doesn’t set specific loan limits, lenders often have a certain point at which they consider the loan a higher risk. Most of the time, they set the limits for regular VA loans at whatever the conventional loan limit is in the area. If it’s outside a high-cost area, the current conventional loan limit is $726,200. Anything above that is a VA jumbo loan. With full VA entitlement, if you have a qualifying credit score of 640 or higher, you can purchase with no down payment or refinance up to the full amount of your equity for loan amounts of $1.5 million or less. You can get a loan of up to $2 million with a 10% down payment or equity amount and a 680 median credit score.VA Approve/Eligible Purchase Or Refinance
VA Refer/Eligible Purchase Or Refinance
VA Jumbo Loans
