When you apply for a home loan, the debt-to-income ratio is the most critical factor for approval. VA loans were introduced officially via the Servicemen’s Readjustment Act on 22nd June 1944. It’s a government loan supported by the Department of Veterans Affairs for the current duty members, surviving spouses, and veterans. 

It’s important to understand the debt-to-income ratio since it shows the lender whether or not you will be able to handle the extra debt together with the current debt with respect to your income. In case this ratio is high, lenders will perceive your application as a risk and might decline your loan. Thus, you should use the VA loan calculator in North Myrtle Beach SC, and find ways to improve your chances if it doesn’t meet requirements. 

Understanding the mechanism of calculation

As mentioned, individuals with low DTIs are considered more favorable since they indicate that the borrower is less risky compared to others with a higher amount of debt. That’s because the latter may be hard pressed for making regular payments when there is any unforeseen financial crisis. 

This indicates that it may be possible to have the loan approved even when the ratio is more than 41 percent. Therefore, make sure that you ask the lender their debt-to-income criteria to find out whether you have a chance to get the VA loan approval. 

Calculating debt to income ratio for VA loan

Once you understand the significance of your debt-to-income ratio for a VA loan, it’s worth finding out how to calculate it. You may use the VA loan calculator in North Myrtle Beach SC, or find your own DTI ratio. Here’s how you may go about it:

Adding your minimum monthly payments: In this regard, you have to factor in the minimum payment for each month. Basically, if the account balance is higher compared to what it usually remains, you have to use the amount that is generally used every month. Some of these can be car loans, rent, alimony, personal loans, and student loans among others. But you don’t have to include transportation costs or grocery bills. 

Dividing the monthly debt by the gross monthly income: If you are the sole applicant for the VA loan, then you have to include your monthly income only. Once you find your gross monthly income, you have to divide the total recurrent debt payments by the gross monthly income. Once you find the decimal, you have to convert it into a percentage. And you just have to multiply what you get by 100.
To find your debt-to-income ratio, you just have to add all the minimum monthly payments including credit cards or mortgage and divide the same by the gross monthly income. The maximum debt to income ratio can vary based on the form of mortgage North Myrtle Beach, Sc you are applying for. It’s critical to note here that the desired ratio for the VA loan is 41 percent. There is no limit set by the Department of Veterans Affairs but they provide regulations for mortgage lenders based on which they can decide their respective limits.