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Profile picture for leigh1982

debt to income

My husband and I are trying to get a VA loan to purchace our first house.  The lender pulled our credit and said that he would have to be the only one on the note.  (I have less than perfect credit)  Since we live in New Mexico, which is a community property state, my debts count against him but my income doesn't help him.  I don't understand why we can't claim my income as a supplemental income to his.  Any suggestions?
  • February 22 2011 - Albuquerque
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Answers (9)

Profile picture for Steffnie
Your debts will only count against him if they are joint accounts on the credit report.  From a credit stand point, if you both are your car loan, he is saying to the creditors that if you don't make the payment he will. You can not use your income, because you have to be able to use your credit score as well.  Although VA says they don't care about credit scores, that is not what we are being told from the other side.  As an ensurable issue the final decision is not from us Loan Originators.  "Over lays" is the key word here.

I am not sure how many would agree with me, but to a certain extend, if the customer just had a low credit score due to not having much credit, I think it should be exceptable.  To have low credit scores and unpaid debt is another story.  You will find someone to help you, keep looking.
  • February 25 2011
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Rain on our parade!

Deborah is right though, lenders do have " over lays" as she says. Now that you know the rules allowed, show your prospective lender what is published and ask them if they follow them. Contact your local VA office and ask them if they can refer you to a lender who will allow your income.

Don't give up!
  • February 24 2011
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Just posting a follow up to Dan's comment:  VA guides may say one thing but be very aware of lender "over lays".  I don't know many investors who will give credit for income without you being on the loan.  I certainly don't believe my company would do it.  Not erroneous information on Dan's part...just that every lender out there is doing their own "version" of FHA and VA, FNMA and FMLC these days so you cannot rely on the online guidelines.

In days of old (dating myself), if you were patient enough to study All REGs you could realistically underwrite your own loans and there would be very little in the way of surprises.  Not so anymore.
  • February 24 2011
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I listened to Ms. Garvin's advice and contacted the source directly for you. There's bad news and good news!

The bad news:

Although It sounds like (from what Mr. Daves360 has said), you have been given incorrect information about community property laws in New Mexico governing all individual debts as joint debts versus VA loan guidelines.

However, read what I copied and pasted directly from the VA guidelines website (URL shown below) which confirms what you were told by your loan officer:
________________________

"If a married veteran wants to obtain the loan in his or her name only, the veteran may do so without regard to the spouses debts and obligations in a non-community property state

However, ... in community property states, the spouses debts and obligations must be considered even if the veteran wishes to obtain the loan in his or her name only. 

Debts assigned to an ex-spouse by a divorce decree will not generally be charged against a veteran-borrower.   This includes debts that are now delinquent."

http://va-guidelines.com/va_co_borrowers.htm
__________________________________________

What are you supposed to do, get divorced, buy the house, and then remarry? (The answer is no ... here comes the good news! This is also from the website regarding income, and this is the other part of why Mr. Daves360 was correct!)
__________________________________________

"Note: In community property states, information concerning a spouse may be requested and considered in the same manner as for the applicant, even if the spouse will not be contractually obligated on the loan."
__________________________________________

So... your income can be counted even if you are not going to be obligated under contract!

There you have it ... go get that home and live happily ever after!
  • February 24 2011
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Make sure you are working with someone who is extremely VA savvy.  VA loans do not have a max ratio requirement...but the residual income needed for each person in the household is absolute.  It sounds to me as though your LO has not given you and your husband SPECIFIC information about your loan package that will empower you to fix, correct or rectify your current situation.  Ask for details and/or get advice from someone who will properly educate you.

Another alternative is to contact your local HUD sponsored housing counseling non-profit.  They will provide you with a thorough understanding of exactly where you are and exactly what will remedy the situation.
  • February 24 2011
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Hi Leigh,
both of my colleagues below have provided you with good advise and my adivce to you is, DONT GIVE UP!!! There may be some very specific things that you can do to improve your situation and achieve your goals of home ownership.  I know the best of the best in the mortgage industry and although most will be held to the VA's strict guidelines, not all will offer you the advice that is in your best interest.  Email or call me if you are interested in shopping your mortgage business and are interested in obtaining their contact information....Thank you for the opportunity to earn your business!

Respectfully,
Veronica Gonzales
[Contact information deleted by Zillow Moderator]  
  • February 23 2011
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Dave says:

" I buy properties all the time as "sole & separate" from my wife, and then add her on to deed upon closing.  I have never run into a situation where a lender counted my wife's (small) debts against me."

That would most likely be because you use conventional financing and this person is obviously using FHA financing where this is a requirement in community property states.

"Anyhow, feel free to contact me to discuss in more detail any time."

Why would they contact you, a real estate agent when you obviously have no idea about actual mortgage guidelines? 

  • February 22 2011
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Profile picture for Daves360
Hi Leigh, I am also a vet in NM, and a real estate broker.  I buy properties all the time as "sole & separate" from my wife, and then add her on to deed upon closing.  I have never run into a situation where a lender counted my wife's (small) debts against me.  The only reason I do this is to manage our credit score separately to keep them independant and strong, something everyone might want to consider in today's economy.  Anyhow, feel free to contact me to discuss in more detail any time. Best of luck!
  • February 22 2011
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Ask your lender for your credit scores they may be lower than acceptable, but you may be able to pull them up by doing just a few "right" things...like paying credit cards down to below 1/2 of the total available line... Paying off the small lines under $500 max available credit accounts.  Then you can both buy the home.  Here is a great link I forward to my clients.  Perhaps it will help you better understand how credit scoring works and what you can do to improve your scores. 
  • February 22 2011
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