Making a Budget to Qualify for VA Refinancing If you are the owner of a VA loan, you can often qualify for VA refinancing further down the road. The key to qualifying for VA refinancing is to do well on your loan up to this point. Good behavior is rewarded in many systems. VA refinancing is the reward for good behavior for a VA loan.
Determining How Much You Can Spend In order to ensure you can qualify later, you need to prepare with a consistent good behavior. The best way to do that is to get into a solid budget that you stick to above all else. Creating a usable budget isn’t that hard. It takes a couple hours of extended thought and you can have it on paper. All you need to do is determine how much you can expect to make each month and how much of that will need to be set aside into two categories: set expenses and fluid expenses. First, take out a piece of paper and list out all of your sources of income every month. Next to each source of income, list how much money you can rely on to come through every month. Add these numbers up to get a workable total. Use this total to determine how much you can spend every month. Draw a box around your income section and label it “Income.” Move to an unused section of the paper to start listing your set expenses. Label the area “Set Expenses” and start listing them according to the guidelines below. These are the payments that have a set total you can rely on every month. For example, they are paying the bill on your insurance, VA home loan, or cable bill. The totals never change, they just simply exist. Place a total amount you expect to pay every month for that expense.
Income More than just bills, this can also include money you set aside for savings accounts, entertainment, or hobbies. Remember that saving money and discretionary expenses are required to live a balanced lifestyle. Double check that you’ve listed every set expense you can expect. Total up the amounts and set that into your budget.
Subtract that subtotal from your income to come up with an idea of how much you have left. This new total will largely influence how the fluid expenses will be set in the next section, so circle it. Box out the set expenses and start in on another section on the paper for your fluid expenses. Label the section appropriately and list out everything else you spend your money on. This section is labeled fluid because the amounts can change from month to month. For example, you may spend less on food one month because you found a cheaper grocery store. Your home utilities often fall under fluid expenses because they depend on energy consumption to determine a total. Once these are listed, prepare to do a bit of research.
Expenses Create an average amount that you normally spend on each item of the list. For example, over the past year, how much did you spend on average for food every month? Do this for each item and write the average next to the item. Total these up until you have a “total fluid expenses” to work with. Subtract that from the total circled in the “set expenses” section. If you end up with a negative number, then you’ll need to adjust some of the numbers on your fluid expenses until you come out positive again. Sometimes this may mean cutting out an unnecessary expense to make ends meet (like a Netflix account and a cable subscription). If that’s the case, you can look through your set expenses to see what can be cut as well. Once this is figured out, you’ll have a budget that you can live on. Follow it strictly and you’ll be able to show good behavior for a VA refinancing possible. Photo Credit: crossfire, alesia17