VA residual income is whatever net income you have left over after paying your usual monthly payments. These payments include taxes, mortgage, car payments, credit cards, utilities, student loans, etc. Though residual income is not a make-or-break VA loan requirement, it is advised that veteran families have a certain amount of residual income before they’re approved for a VA loan. How much residual income you need depends on the size of your household, where you are in the United States, and how much money your family makes per year.
VA Residual Income Guidelines
Residual income is not to be confused with your debt-to-income ratio. Your DTI measures how much debt you owe each month, while residual income measures how much money you have left over after paying all those debts. Like residual income, your DTI plays a role in you being approved for a VA loan. Guidelines regarding minimum residual income or maximum DTI aren’t going to automatically disqualify you from getting a VA loan. But they’re important indicators of how well you’ll be able to handle a mortgage.
Your DTI and residual income also influence one another. If you have a DTI greater than 41 percent, your residual income is going to have to exceed the minimum requirement by 20 percent. This means that if more than 40 percent of your income is going to monthly debts, the VA wants to make sure you have enough residual income to accommodate all those debts and still leave you some money for non-essential spending.
As a borrower, you want your residual income to be high and your debt-to-income ratio to be low (less than 20 percent). The VA has set a maximum debt-to-income ratio of 41 percent, but again, many VA lenders are flexible and might approve you at a higher ratio. It depends on your residual income and what other assets you have available for mortgage payments.
VA Residual Income Charts
Have a look at these VA residual income charts to know approximately how much residual income you should expect to have each month.
For home loans of $80,000 or more, the residual income must be greater than:
|Up to 7||Add $80 for each additional family member|
For home loans of $79,999 or less, the residual income must be greater than:
|Up to 7||Add $75 for each additional family member|
And here’s a table explaining which states are included in which geographical region:
District of Columbia
Preparing Veterans for Homeownership
At Low VA Rates, we want to give all veteran families the means of purchasing the house of their dreams. That’s why our loan officers are equipped to educate all borrowers on residual income and DTI, and help them reach a position of financial stability. If you have questions, or if you’re worried about your residual income keeping you from being approved for a VA loan, give us a call at 866-569-8272, and we’ll be happy to help you out.