Ask a Builder Question

Home Creations Ask a BuilderHi everyone, Jan here again. I received this interesting question the other day – read on for my response.


Question: I will be looking for a house soon and was wondering if there are lenders who deal with VA loans and new home buyers. I am looking for a house around $150,000, one that I can purchase and include some personal bills in with my mortgage payment. I currently have $45,000 in debt including two vehicles and other bills. Will lenders bundle everything I owe – house payment, car payments, credit card payments – into one bill?


Answer: With a purchase loan, you cannot roll any current bills into the mortgage. A VA loan is a loan with no down payment, so you can finance 100% of the purchase price. You will have money for closing costs (which Home Creations pays if he uses one of our participating lenders, saving about $2,000 – $2,500). At closing you’ll pay for property taxes, insurance and interest to get your escrow account set up.

Interest rates are still super low, plus the federal government is offering an $8,000 first-time buyer tax credit that you file for when you do your 2009 federal income taxes. Keep in mind that the money comes after the closing, so you can’t use any toward the purchase, but you could use the money to pay down your $45,000 debt.


For qualifying, the lender looks at gross monthly income before taxes. On a VA loan, up to 41% of your gross income can go for your mortgage payment, minimum credit card debt, car payments, child support or alimony if applicable. Usually if a loan can be paid off in six months or less, it’s not counted in your debt-to-income ratio. Remember that to the lender, it’s your monthly debt that is more important than the overall amount you owe.


If you were to buy a home at a super low price that appraises for greatly more than the purchase price, you may be able to take out a home equity loan or 2nd mortgage shortly after closing to pay off those debts. There are many schools of thought regarding bringing your personal credit debts into your mortgage. If you default on your car loan, the bank takes your car. If you default on the home equity loan or 2nd mortgage you take out to pay off that car loan and you get behind, the bank may foreclose on your house.


As you start your home search, try to avoid any new debt, and make all your car payments and credit card payments on time. Credit scores are more important now than ever before when getting a mortgage.