VA Residual Income: The Test Most Buyers Have Never Heard Of
The VA checks how much money your family has left each month, not just your debt ratio. Here is the chart and how to run the numbers.
Most mortgage programs look mainly at your debt-to-income ratio. VA loans add a second test called residual income: the money your household has left each month after taxes, the new house payment, upkeep and your other debts. The VA's Lenders Handbook sets a minimum by family size and region. If you clear it comfortably, lenders can be more flexible about other parts of your file.
How residual income is calculated
Start with gross monthly income and subtract:
- Federal, state and local income taxes, Social Security and Medicare.
- The full new housing payment: principal, interest, property taxes, homeowners insurance and any HOA dues.
- An estimate for maintenance and utilities. VA guidance uses $0.14 per square foot of living area per month.
- Monthly payments on other debts, such as car loans, student loans and credit cards.
- Recurring obligations such as child support or alimony, and job-related costs like child care.
What is left is your residual income. It must at least equal the figure in the VA table for your family size, region and loan amount.
The VA residual income chart
Loan amounts of $80,000 and above (most home purchases today):
| Family size | Northeast | Midwest | South | West |
|---|---|---|---|---|
| 1 | $450 | $441 | $441 | $491 |
| 2 | $755 | $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 |
For families larger than five, add $80 for each additional member, up to a family of seven.
Loan amounts of $79,999 and below:
| 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 |
For families larger than five on these smaller loans, add $75 for each additional member, up to a family of seven. Family size counts everyone in the household who depends on the income, including a spouse and children.
Which region are you in?
| Region | States |
|---|---|
| Northeast | Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Vermont |
| Midwest | Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin |
| South | Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, West Virginia |
| West | Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, Wyoming |
Worked example: a family of four in Texas
A family of four buys a $300,000, 1,800 square foot home in Texas (South region) with no down payment, financing the 2.15% funding fee at 6.25%. The required residual income is $1,003.
| Per month | |
|---|---|
| Gross monthly income | $7,000 |
| Federal, state and payroll taxes (assumed) | -$1,250 |
| Mortgage principal and interest | -$1,887 |
| Property taxes, insurance and HOA (assumed) | -$450 |
| Maintenance and utilities (1,800 sq ft at $0.14) | -$252 |
| Car loan and student loan | -$650 |
| Residual income | $2,511 |
| VA minimum for this family | $1,003 |
| Margin above the minimum | $1,508 (150%) |
This family passes with room to spare. Run your own numbers in the VA residual income calculator. The tax figure is an assumption, and your lender will calculate it from your pay stubs. Use the VA affordability calculator to test different prices.
Why the margin matters: the 41% rule
The VA uses a debt-to-income benchmark of 41%. If your ratio is above 41%, the Lenders Handbook says the loan can still be approved when residual income is well above the minimum, and it points to residual income at least 20% higher than the table figure as a key compensating factor. That is why a family with modest debts but a high ratio can still get a VA loan. Read more in our VA debt-to-income guide.
How to improve your residual income
- Pay off a small installment loan before applying. Removing a $300 car payment adds $300 of residual income.
- Look at a smaller or more efficient home. The maintenance estimate scales with square footage.
- Include all stable income, such as BAH or BAS for active-duty borrowers and documented disability compensation, which is not taxed.
- Choose a home with lower HOA dues or property taxes.
Frequently asked questions
Is residual income required for every VA loan?
Yes for purchase loans and cash-out refinances that are underwritten. An IRRRL usually does not require a new residual income calculation.
Do lenders use gross or net income?
They start from gross income and subtract taxes and the other obligations listed above, so the result is closer to take-home money left after bills.
Does VA disability compensation count?
Yes, when it is documented. Because it is not taxed, it often adds more to residual income than the same amount of salary would.
Where does the chart come from?
It is published in chapter 4 of the VA Lenders Handbook (VA Pamphlet 26-7), which lenders use to underwrite VA loans.
Sources
- VA Lenders Handbook (VA Pamphlet 26-7), chapter 4: credit underwriting
- VA.gov: purchase loan requirements
This page is educational and is not legal, tax or financial advice. Rules and rates can change, so confirm the details with the VA and your lender.