Our veteran clients are building an investment portfolio and wanted to use their VA benefit to buy a new primary home, but the DTI was 67%.
The Situation
Our buyers owned a primary home with an existing VA loan and wanted to buy a new primary home with their VA benefit.
Both husband and wife receive VA disability and are rated at 100%
They wanted to keep their existing home and convert it into a rental.
The Challenge
These clients just purchase an investment property a few months ago that’s being used as a short-term rental.
VA guidelines require two years of rental history for investment property, so the full PITI on that investment must be considered in the DTI (pushing it to 67%).
There wasn’t enough VA bonus entitlement for the husband to buy another home with zero down, and they didn’t have the funds needed for down payment.
How We Structured It
We tracked down the wife’s points statement from her combined service in the National Guard & Reserves and submitted it to the VA to obtain her certificate of eligibility.
It took a few weeks to get the COE, but we were able to use her eligibility to buy with zero down.
We omitted the property taxes from the qualifying DTI because their 100% VA disability rating exempts them from paying property taxes in Michigan.
We had sufficient residual income for approval despite the high DTI.
Why This Might Matter
VA loans with high DTI often hit policy constraints at banks because of overlays on residual income calculations or DTI caps below agency max.
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Do you have a deal that doesn’t fit your credit policy but the client seems solid?
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