VA Residual Income

VA residual income is the leftover income that remains after a homeowner has fulfilled all of their monthly credit obligations. To get a mortgage approved, the Department of Veterans Affairs requires VA mortgage applicants to show a minimum VA residual income based on their location and household size.

Reduced Foreclosure Rates For VA-Backed Loans

The housing market is rebuilding with first-time buyers playing an outsized part in its rebirth. This is, in part, because the homeownership costs are lower than rental expenses in a lot of U.S. cities.

It’s also due to low- and no-down payment mortgage programs.

One such “zero-down” program is the VA loan from the Department of Veterans Affairs.

Available to veterans and members of the military, VA home loans give military buyers the ability to finance 100% of a home at low VA mortgage rates. Unlike other 100% financing programs, though, VA loans default at a really low rate.

The trick is a common-sense guideline called “residual income”.

VA Mortgages: Minimum Residual Income

Depending on where you live and the size of your household, your VA residual income criteria will vary. The following values are updated and accurate as of 2022. They assume a loan size of at least $80,000.

Northeast Region VA Residual Income Tables

For Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont, the VA residual income tables are as follows:

  • Family size of 1: $450
  • Family size of 2: $755
  • Family size of 3: $909
  • Family size of 4: $1,025
  • Family size of 5: $1,062
  • For each additional family member, add $80 up to a family of 7

Midwest Region VA Residual Income Tables

For Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, and Wisconsin, the VA residual income tables are as follows:

  • Family size of 1: $441
  • Family size of 2: $738
  • Family size of 3: $889
  • Family size of 4: $1,003
  • Family size of 5: $1,039
  • For each additional family member, add $80 up to a family of 7

South Region VA Residual Income Tables

For Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, and West Virginia, the VA residual income tables are as follows:

  • Family size of 1: $441
  • Family size of 2: $738
  • Family size of 3: $889
  • Family size of 4: $1,003
  • Family size of 5: $1,039
  • For each additional family member, add $80 up to a family of 7

West Region VA Residual Income Tables

For Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming, the VA residual income tables are as follows:

  • Family size of 1: $491
  • Family size of 2: $823
  • Family size of 3: $990
  • Family size of 4: $1,117
  • Family size of 5: $1,158
  • For each additional family member, add $80 up to a family of 7

Residual Income Can Overcome High DTI

An integral part of mortgage underwriting is a borrower’s debt-to-income (DTI) ratio, the percentage of monthly debt as compared to monthly income. Applicants with low debt-to-income ratios are considered less risk than applicants with high debt-to-income ratios.

A low debt-to-income ratio is 20% or less. A high debt-to-income ratio is anything over 40%. Different mortgage programs enforce different debt-to-income cut-offs but analyzing an applicant’s DTI is nearly always considered the keystone of a solid underwriting process.

The Department of Veterans Affairs mortgage guidelines state that 41% is the maximum debt-to-income ratio for a military mortgage borrower. However, because of residual income, applicants whose DTI exceeds 41% can be given an exception.

For applicants whose residual income exceeds the VA’s minimum residual income guidelines by 20% or more, debt-to-income ratios can be a non-factor.

A VA loan borrower in Ohio, then, with a family of 4 and a high DTI would be required to present residual income of $1,204, which would satisfy the VA and its underwriters. The standard family-of-four residual income guideline for Ohio is $1,003.

Apply for a VA Mortgage

The Department of Veterans Affairs’ residual income criteria is imperfect. Veterans with strong credit, but reduced incomes, might find it hard to secure a mortgage. However, along VA’s rigid appraisal procedure as well as the agency’s commitment to helping veterans avoid foreclosure, residual income standards make for good policy.

VA mortgage rates remain low across the country. If you’re a veteran or active member of the military, see what a VA loan can do for you. Rates are offered online without cost, no-obligation, and with no social security number is required to get started.

With Mission First Capital, you can start your investment journey alongside other military members and veterans! If you have questions or would like to talk about potential partnerships or investment opportunities, don’t hesitate to reach out. Give us a call at +1 (844) 632-3863 or visit our website MissionFirstCapital.com to learn more and let’s invest today!