Housing Allowances : Who Gets and Doesn’t Get a Mortgage

I cannot, for the life of me, get us approved for a VA home loan. It just amazes me. I became a United States Marine. I served two tours in Iraq. I earned two Bachelor’s degrees. I’m working on a Master’s degree. But I cannot obtain a home mortgage using a VA loan. My biggest obstacle right now is the fact the overwhelming majority of our income, supplied by the VA nonetheless, doesn’t count?! I know it’s ironic. VA supplied income doesn’t count towards a VA loan. The greater irony is that two forms of income are Basic Allowances for Housing as part of our Post-9/11 GI bill benefits. Yes, money intended for housing cannot be used to purchase a house for oneself. I can blow all that money on rent, but I cannot buy a house with it.

It’s sad because it’s not a tiny amount of money either. One of these days I’ll write a post about why I’m comfortable talking money this casually with strangers, but it really can wait for another day. For the months of February, March, and April in the spring semester, my husband and I will accrue $2,922 a month in Post-9/11 housing allowances. We live in the Phoenix Valley and could rent a ridiculously oversized luxury rental home with all that money. It would be a waste, but that’s one way we could spend our money. In the eyes of our preferred lender, USAA, this money does not exist. I’m not bashing on USAA. They have their own policies to abide by and we’ve had great customer service in the past and throughout this frustrating process, but I’m disappointed. The explanation I received yesterday was we could stop attending school at any time and that form of income would dry up. (Today, I was also told that it’s the VA who makes this rule.) Really?! If I stopped going in to work, I’d lose my regular income, too.

The lending industry makes no sense to me. As I’ve discussed this matter more privately with friends, stories come out of the woodwork that people they know, whose existence is solely dependent on their Post-9/11 housing allowance, are getting approved for home mortgages. Veterans who do not work but go to school full-time are privileged to use their housing allowance on their own homes and not paying someone else rent. The USAA representative I spoke to yesterday even confirmed it’s possible a local lender could approve us using this form of income. So, if a local lender can use this income, why can’t one of the biggest banks in the world? A bank that can absorb a little more risk than a smaller, local lender?

I am a little angry about this issue because in the eyes of the lender, the $780 I pay in rent and the $750 I pay for daycare combined with the remaining amount of other debts we have leaves no room for a home purchase.

The beautiful home I've had my eye on since October.
The beautiful home I’ve had my eye on since October.

The home I want is a foreclosure and it’s unlikely I’ll find another in the neighborhood for quite some time. The listing agent dropped the price about $21,000 and I wrote him a heartfelt letter about my efforts to acquire the property. I asked him last night if he struggles to find a buyer would he would consider donating it to Homes on the Homefront. Honestly, I’m tired of investors picking up beautiful foreclosed properties, doing some basic repairs, and drastically hiking up prices that hurts local economies around the nation.

The answer I got back was disappointing. The individual doesn’t own the property but is a broker for Freddie Mac. He did offer his services as a broker but clearly he missed the point that I’ve struggled to purchase a home because two-thirds of my family’s income comes in the form of non-qualifying funds.

If you ever want to read a couple good books about the problem of society’s reliance on dual incomes in the housing market and the relationship between bankruptcy and lending practices, I highly recommend the following books:

Going Broke: Why Americans Can’t Hold On To Their Money by Stuart Vyse
The Two-Income Trap: Why Middle-Class Mothers and Fathers Are Going Broke by Elizabeth Warren and Amelia Warren Tyagi

Thankfully, I know our rental situation won’t last forever. Even if we are not fortunate to own a home before my husband becomes a lawyer, we’ve established the guideline that less is more. We do not want to be a “house poor” family and it stuns me to see homes in the $600,000 range in Gilbert, our favorite Phoenix suburb. It is hard for us to justify spending anymore than $200,000 to $250,00 on a home but honestly our goal is to spend even less than that on a property. It is even harder for me to justify spending a large sum to purchase a home after reading the two books I mentioned previously. Housing has been so artificially inflated with the competition between dual-income earners that it’s no surprise the housing bubble burst as badly as it did. It might not be a bad idea for us to wait for it to burst again because the local industry here in Phoenix clearly didn’t learn its lesson. New home subdivisions are cropping up incredibly fast and I wouldn’t be surprised if five years from now a number of the owners just walk away from their properties again when the owners realize they can’t make their payments or might be underwater on their homes.

If we brave a home purchase in 2015, it will require several things and I’m not sure it’s entirely still possible to get a loan once again since we lack that second “true” income.

-Get our second car paid off (possible before September 2015)
-Get our Apple card paid off (Will be done in January 2015)
-Stop paying for daycare (Will be done in May 2015)

Unfortunately, the other obstacle we’ll encounter is the multitude of other families looking to purchase before the start of the new academic year, which is another reason this December home was a good “fit” for us. Stay tuned….some day we might be homeowners. If the VA allows it.

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