Residual Income:
VA home loans do not offer a guaranteed loan approval. To qualify for a VA home loan, you must be able to afford the payment and any existing debt you currently have. In addition to this, you will need to have money for food, entertainment, housing maintenance expenses, etc. This remaining amount is called residual income.
Sufficient residual income is used with debt to income ratios to determine your individual maximum loan eligibility amount. As a standard policy, residual income usually must be equal to, or above the amount below in the event that the borrowers debt to income ratio exceeds 61%.
Residual Income Requirements For VA Home Loans
For loan Amounts $79,999 and below, the residual income must exceed:
| Family Size | Northeast | Midwest | South | West |
| 1 | $390 | $382 | $382 | $425 |
| 2 | $654 | $641 | $641 | $713 |
| 3 | $788 | $772 | $772 | $859 |
| 4 | $888 | $868 | $868 | $967 |
| 5 | $921 | $902 | $902 | $1,004 |
| Over 5 | + $75 per person up to a family of 7 |
+ $75 per person up to a family of 7 |
+ $75 per person up to a family of 7 |
+ $75 per person up to a family of 7 |
For Loan Amounts of $80,000 and above the residual income must exceed:
| Family Size | Northeast | Midwest | South | West |
| 1 | $450 | $441 | $441 | $491 |
| 2 | $775 | $738 | $738 | $823 |
| 3 | $909 | $889 | $889 | $990 |
| 4 | $1,025 | $1,003 | $1,003 | $1,117 |
| 5 | $1,062 | $1,039 | $1,039 | $1,158 |
| Over 5 | + $80 per person up to a family of 7 |
+ $80 per person up to a family of 7 |
+ $80 per person up to a family of 7 |
+ $80 per person up to a family of 7 |
For an explanation of areas, see the chart below.
Debt to income ratio
The VA debt to income ratio is not set at a maximum rate. Because individual circumstances vary, each borrowers entire financial situation is reviewed. The components that are reviewed, evaluated and scrutinized by the VA underwriter include:
Credit history and use of credit:
Although there is no credit score requirement for a VA loan, the borrower should show conservative / minimal use of credit to exceed the underwriters normal threshold of the debt ratio. Please note: Each lender does have their own credit requirements.
Employment stability and history:
In the event that income is not sufficient to meet residual guidelines or the debt to income ratio preferred by the underwriter is in excess, employment stability with minimal gaps can be used to help compensate.
Liquid Assets / Down Payment:
Although a down payment is not required, liquid asset reserves or the ability to make (or offering of) a down-payment is a factor that can increase the chances of loan approval. If the borrower makes a down payment, their VA Loan Funding Fee will be reduced. Liquid assets however, are required. The amount of liquid assets required will vary and is subject to the underwriters discretion.
Region Key For VA Home Loan Residual Income
| Northeast | Midwest | South | West |
| Connecticut | Illinois | Alabama | Alaska |
| New Hampshire | Indiana | Arkansas | Arizona |
| Pennsylvania | Iowa | Delaware | California |
| Maine | Kansas | District of Columbia (DC) | Colorado |
| New Jersey | Michigan | Florida | Hawaii |
| Rhode Island | Minnesota | Georgia | Idaho |
| Massachusetts | Missouri | Kentucky | Montana |
| New York | Nebraska | Louisiana | Nevada |
| Vermont | North Dakota | Maryland | New Mexico |
| – | Ohio | Mississippi | Oregon |
| – | South Dakota | North Carolina | Utah |
| – | Wisconsin | Oklahoma | Washington |
| – | – | South Carolina | – |
| – | – | Tennessee | – |
| – | – | Texas | – |
| – | – | Virginia & West Virginia | – |
| – | – | Guam, Mariana Islands, Virgin Islands | – |
* The US Department of Veteran Affairs debt-to-income ratio is a ratio of total monthly debts’ payments (housing expense, installment debts, etc.) to gross monthly income. It is merely a guide and, as an underwriting factor, it is secondary to the residual income. It should not automatically trigger approval or rejection of a loan. Instead, the underwriter will consider the ratio in conjunction with all other credit factors listed above.
