VA checks two things: your debt-to-income ratio and your residual income, the money left each month for living costs. This works out the price both support.
How it works
Debt-to-income: the housing payment (principal, interest, taxes, insurance and dues) plus other debts, divided by gross income, at VA’s 41% guideline
Residual income: gross income less income taxes and Social Security, the housing payment, maintenance and utilities, and other debts. It must meet VA’s minimum for your family size and region, from 38 CFR 36.4340 (a lower table applies to loans under $80,000, and active-duty members and retirees using a nearby base’s facilities get a 5% reduction). The calculator finds the largest loan that passes both tests at your rate and term, and the larger loan VA allows above 41% when residual income is at least 20% over the minimum.
Keep in mind
- These are VA’s guidelines; lenders can add stricter rules of their own, and automated underwriting weighs credit and savings too.
- The VA funding fee is not included. If you finance it, the loan grows by the fee, unless you are exempt; the VA funding fee calculator works it out.
- Families of more than seven people: VA’s tables stop at seven, so ask me for the figure.
Questions
What is residual income for a VA loan?
The money left each month after income taxes, the new housing payment, maintenance and utilities, and your other debts. VA sets a minimum by family size and region: for a family of four in the West on a loan of $80,000 or more, it is $1,117 a month.
Can a VA loan go above a 41% debt-to-income ratio?
Yes. VA lets lenders approve a higher ratio with justification, and when residual income is at least 20% above the minimum, no extra justification is needed. The calculator shows that larger figure.
