How To Improve Your Chances Of Getting A VA Loan In 2023
A VA loan is a valuable benefit for service members, veterans, and their families, offering competitive interest rates, no down payment requirements, and no private mortgage insurance (PMI). However, qualifying for this benefit can often seem like an uphill battle.
Here are ten actionable steps to improve your chances of securing a VA loan in 2023.
1. Build A Strong Credit History
The first step in securing a VA loan starts with your credit history.
While VA loans are more forgiving than conventional loans, lenders still look at your credit score to determine your ability to repay the loan. Agencies such as 1st United Mortgage will use this information to decide whether or not to approve your loan application.
To build a strong credit history, ensure you pay all your bills on time, keep your credit card balances low, and be mindful not to apply for too much new credit at once. Reviewing your credit reports regularly can also help you identify any errors that might be dragging your score down.
2. Demonstrate Stable Employment
While VA loans don’t require a specific income level, lenders want to see that you have a reliable income. Demonstrating stable employment or a consistent income source improves your chances of approval. In general, lenders prefer borrowers who’ve been in the same job or industry for at least two years.
3. Keep Your Debt-To-Income Ratio Low
Your debt-to-income (DTI) ratio is another crucial factor lenders consider when assessing your loan application.
This ratio is the percentage of your gross monthly income that goes toward paying debts. The lower this ratio, the better your chances of approval. Aim for a DTI ratio under 41% to increase your chances of getting approved for a VA loan.
4. Save For Closing Costs And Funding Fees
Although VA loans do not require a down payment, there are still closing costs and funding fees associated with securing the loan. While it’s possible for the seller to pay some of these costs, it’s not guaranteed. Therefore, saving up to cover these expenses can smoothen the loan acquisition process.
5. Get A Certificate Of Eligibility
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Before you apply for a VA loan, ensure you have a Certificate of Eligibility (COE).
The COE verifies lenders that you meet the minimum service requirements for a VA loan. It’s possible to apply for a VA loan without a COE, but having one can speed up the process and improve your chances of approval.
6. Work With A VA-Experienced Real Estate Agent
Working with a real estate agent experienced in VA loans can be a game-changer. These agents understand the VA loan process and can help navigate the intricacies of the loan, including helping you find a VA-compliant property.
7. Understand Your VA Entitlement
Your VA entitlement is the amount that the Department of Veterans Affairs guarantees on your home loan.
While you don’t need to use your entire entitlement, understanding how much you’re entitled to can help guide your home shopping process and influence your loan approval chances. You can find this information on your Certificate of Eligibility.
8. Choose A VA-Approved Lender
Not all lenders can issue VA loans, so it’s crucial to ensure that your chosen lender is VA-approved. These lenders understand the VA loan process thoroughly and can guide you through the steps required to secure the loan.
Working with a VA-approved lender will likely improve your loan approval chances and the overall borrowing experience.
9. Avoid Major Purchases Before Applying
Lenders examine your entire financial picture when deciding whether or not to approve your VA loan. That includes checking for recent large purchases that could impact your ability to repay the loan.
Avoid buying expensive items like a new car or large appliances before applying for your loan, as these can affect your debt-to-income ratio and potentially hinder your approval chances.
10. Take Advantage Of VA Loan Education Resources
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The VA provides a wealth of resources to help veterans understand the loan process. Take time to educate yourself on the ins and outs of VA loans.
Knowledge is power, and understanding the specifics of VA loans can help you navigate the process and improve your chances of securing the loan.
In Conclusion
Securing a VA loan may seem daunting, but it doesn’t have to be. By building a strong credit history, demonstrating stable employment, keeping your DTI ratio low, saving for closing costs and funding fees, obtaining a COE, and working with a VA-experienced real estate agent, you can significantly improve your chances of securing a VA loan in 2023.
Remember, a VA loan is not just a privilege; it’s a benefit you’ve earned through service. By understanding the VA loan process and preparing accordingly, you’ll be well on your way to homeownership.
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What Is Net Operating Income? How To Calculate NOI?
Net operating Income is a valuation method. If you are a real estate professional, then you have to calculate it. It will help you in the determination of the income-producing properties For the calculation of NOI, Operating expenses need to be deducted from income a property generates. Most of the time, people often get confused between the concepts of Net Income and Net operating income. Net Operating Income will help you to know the capacity of the property to generate revenue. What Is Net Operating Income? Net operating Income helps you to calculate the profitability of an asset. It can be an income from an investment as well. After subtracting the operating expenses from Income, you will get net operating income. Most of the time, this parameter is used in the real estate industry. In order to determine the profitability of investment properties such as apartment complexes, warehouses, and buildings, this Net Operating Income is used. You can get the similar information in Investopedia. What Is The Net Operating Income Formula? You have to follow the simple Net Operating Formula to calculate the Net Operating Income. Let’s go through it once. Most of the time, for making an accurate valuation of commercial real estate, the Net Operating Income Formula is taken into consideration. You cannot ignore this fact from your end. Net Income Formula For Managerial Accounting The Net income formula for managerial accounting involves the following calculation methods:- Net Income = Total Revenue -Total Expenses Net Operating Income vs Net Income Net Operating IncomeNet IncomeNOI is a metric typically used in the context of real estate and investment propertiesNet Income, also known as Profit or Earnings, is a fundamental financial metric used in the context of businesses, not just limited to real estate.It represents the income generated from the property's operations before accounting for taxes, interest, depreciation, and amortization (known as EBITDA). It represents the profit a company makes after deducting all expenses, including operating expenses, interest, taxes, depreciation, and amortization (known as EBITDA). The formula for calculating NOI is: NOI = Total Revenue - Operating ExpensesThe formula for calculating Net Income is: Net Income = Total Revenue - Total ExpensesOperating expenses include items like property management fees, maintenance costs, property taxes, insurance, and other day-to-day operational expenses.Total expenses include operating expenses, interest payments on debt, income tax, and depreciation or amortization. Are Operating Income & Operating Revenue Same? Operating revenue is not the same as operating income. Operating revenue signifies the total cash inflow from your primary income-generating activity. After subtracting the cost of doing the business, the leftover income is the operating income. It is the primary form of difference between the two concepts. Operating income calculation is completed from the gross income depreciation, and amortization from the gross profit is deducted. Operating expenses are the expenses that involve administrative costs, rent, and supplies. If you want to calculate the gross profit, you need to calculate the Cost Of Goods Sold from the revenue. It is almost similar to the calculation of marginal cost. Benefits Of Calculating Net Operating Income There are numerous benefits to calculating the net operating income for your business. Now, you may be wondering what can be the benefits of calculating the Net Operating Income. Let’s dig deep into the details to have better insights into it. Its process of calculation is almost similar to that of the current ratio formula. 1. Profitability Assessment NOI offers you clear insight into operating profitability. When you subtract the property’s operating expenses from the gross rental income, you will get a clear idea of how much money the property is generating before the calculation of the taxes and financing. 2. Comparative Analysis Investors can use NOI to compare the financial performance of different properties. This comparison allows them to identify which properties are more profitable and make informed investment decisions. Investors need to identify the financial performance of the property before buying it. Net Operating Income can leverage the value of your property. 3. Valuation It is one of the primary components in determining the value of the property. You can estimate the value of the property after dividing it by its capitalization rate. It will be easier for you to make an accurate estimation of the market value of the property. Try to make things easier from your end. 4. Financial Planning Property owners can use NOI to create budgets, assess ongoing financial performance, and plan for the future. Understanding the NOI helps in making decisions related to rent increases, cost management, and property improvements. It is one of the basic purposes of making the calculation of NOI. It can benefit you on a pro-rata basis as well. 5. Financing Lenders often use NOI to assess the financial viability of a property and determine the amount of financing they are willing to provide. A higher NOI can lead to more favorable financing terms. You need to make the financial planning in the perfect order while attaining your requirements. 6. Income Tax Planning NOI can have implications for income tax planning. Property owners need to understand the taxable income generated by their property. It can be different from the NOI due to factors such as depreciation. In accounting terms, Depreciation reduces the value of the assets to a considerable extent. You need to get through these facts before the NOI calculation. 7. Risk Management When closely monitoring NOI, property owners can identify changes in the financial performance of a property. This allows them to address issues promptly, such as rising expenses or declining rental income, to mitigate financial risks. You need to identify the areas where Non-Operating Income can be of great help to you. 8. Investors Confidence The confidence of the investors depends largely on the operating income. Most of the time, we miss out on this fact at the time of selling the property to its investors. When investors and stakeholders have access to accurate NOI figures, it builds confidence in the property's performance. It can attract potential investors or partners. Final Take Away Hence, if you do not calculate the operating income, then you cannot get the correct insight into the accurate estimation of the property. You must not make your selection on the wrong end. Proper application of the NOI calculation can make things easier for your valuation. You can share your views and comments in our comment box. It will help us to know your take on this matter. 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