It occurred to me that "lending slang" can be a little confusing to say the least. Conventional lending is hard enough add VA lingo and you have lending terminology on steroids. Lets take some basics and then focus on the main point which Is BAH ( Basic Housing Allowance)
LTV- Loan to Value ratio. This is determined by what is owed on a home compared to what the home is actually worth.
DTI- Debt to income ratio. There are two ratios here that and a formula that is used to calculate a buyers affordability. The front end ratio of the DTI is determined by the borrowers debt owed compared to income earned. In adding up this figure one takes into account revolving debt such as credit card payments, installment loans such as Car payments and student loans, alimony child support etc. All these numbers computed will give us a front end ratio. Lenders typically like to see no higher then 38%. A back end ratio is derived when you add the front end plus the borrowers mortgage payment. As of the last few months Lenders are becoming very strict with lowering these ratios. Last year I did a loan for some VA clients that had a 70% back end ratio and it was approved. Now we are very lucky to have a 50 to 55% back end ratio approved.
Now to the main topic which is BAH or (basic Housing Allowance) This is income paid to military personnel for housing. If a service member stays on base this monies is directly taking out of their LES or what a civilian would know as a pay stub. The way that it is set up can be a little tricky as many times service members will think the are getting " FREE HOUSING" This is not the case. In Hawaii BAH is much higher then most other parts of the country as daily life costs more to live here. A younger inexperienced military member with a E-1 to E-4 rank will receive at least $1555 for housing. Again I repeat if they stay on base that monies is directly taken out of their pay. I believe one can not move off base until the earn a rank of E-4. Now if that E-4 moves off post and rents a room for $800 they will pocket $755. Better yet they take that monies and get into a starter condo. This can be done if they are disciplined enough to add around $300-$350 of their base pay to their BAH pay. In my mind their is no safer investment then owning a piece of paradise and even better you are getting a break from uncle sam at the same time. Military member's you have the lending world at your disposal. Will you put it to work for you is the question?
That's all Folks
Comments(1)