Home Mortgage & Refinancing Serving Locations Throughout New York State
Call us Today: 518-782-1202

VA Loan Residual Income Requirements

Happy couple holding keys to new home and house miniatureVA home loans are among the best mortgages available for homebuyers who qualify. They offer favorable terms and competitive rates – but you must meet specific qualification standards in order to be eligible to finance your home with a loan backed by the Department of Veterans Affairs. 

If you’re looking to apply for a VA home loan and wondering if you qualify, one key element you must take into account is residual income. 

Here, we take a closer look at residual income so you can have a deeper understanding of what it is and how it may impact your options when it comes to financing your home purchase.

What is Residual Income

Within the context of VA home loans, residual income is the income you have left over every month after all of your major expenses are covered. “Major expenses” include: 

  • Mortgage payments
  • Rent
  • Student loans
  • Car loans
  • Childcare expenses
  • Utilities 

Residual income is also referred to as discretionary income, meaning that it is income that you can spend at your discretion since it is not tied up covering other major ongoing expenses. Residual income is money that is used to cover things like: 

  • Food
  • Gas
  • Clothing
  • Vacations
  • Investments

VA Residual Income Requirements

As mentioned previously, VA home loans have specific residual income requirements that must be met for individuals to qualify for financing through a VA mortgage. Essentially, the VA wants to be sure that veterans have sufficient income each month to cover a family’s needs beyond the mortgage payment. 

The residual income requirements are in place in order to ensure that those who receive VA home loans are financially stable enough to maintain them, as a home loan can put a new financial strain on a family. 

But VA residual income requirements are not one size fits all. The varied residual income minimums reflect the variations in housing costs and general living expenses depending on where in the USA you live and how many people are in your immediate family.

VA Residual Income Minimums

VA residual income minimums are assigned based on family size and geographic region. Below is a summary of VA residual income minimums for areas throughout the US listed by region. 

But first, here is the geographic breakdown of the states by region as designated by the VA so you can determine which minimum applies to you:

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, DC, 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

VA Residual Income Minimums for Loan Amounts of $79,999 and Below*

Family size of 1: $390 in the Northeast, $382 in the Midwest, $382 in the South and $425 in the West.

Family size of 2: $654 in the Northeast, $641 in the Midwest, $641 in the South and $713 in the West.

Family size of 3: $788 in the Northeast, $772 in the Midwest, $772 in the South and $859 in the West.

Family size of 4: $888 in the Northeast, $868 in the Midwest, $868 in the South and $976 in the West.

Family size of 5: $921 in the Northeast, $902 in the Midwest, $902 in the South and $1,004 in the West.

*For families larger than 5 people, $75 should be added for each additional family member, up to seven people, to calculate the residual income minimum. 

The VA requires less residual income for those with loan amounts below $80,000. 

Those with home loan amounts at $80,000 and above should use the following residual income minimums as a guide: 

VA Residual Income Minimums for Loan Amounts of $80,000 and Above*

Family size of 1: $450 in the Northeast, $441 in the Midwest, $441 in the South and $491 in the West.

Family size of 2: $755 in the Northeast, $738 in the Midwest, $738 in the South and $823 in the West.

Family size of 3: $909 in the Northeast, $889 in the Midwest, $889 in the South and $990 in the West.

Family size of 4: $1,025 in the Northeast, $1,003 in the Midwest, $1,003 in the South and $1,117 in the West.

Family size of 5: $1,062 in the Northeast, $1,039 in the Midwest, $1,039 in the South and $1,158 in the West.

*For families larger than 5 people, $80 should be added for each additional family member, up to seven people, to calculate the residual income minimum. 

When calculating your residual income minimum, it’s also important to note that: 

  • Members of your family should include children from a previous marriage who depend on the borrower financially.
  • The residual income requirement may be reduced for active duty service members, or for individuals borrowing in close proximity to a military base.
  • The guidelines only take into account significant monthly financial obligations and not minimal, day-to-day expenses. 
  • In some cases, residual income requirements can be offset by the income that’s brought in by another member of the household. For instance, if the spouse of the purchaser brings in enough income to cover their own monthly debts or to offset the cost of children living in the home, the family could be considered to include fewer people for the purpose of calculating the minimum residual income required. Policies on this vary by lender.

Navigating VA Residual Income Guidelines as a Home Buyer

While at first glance these residual income minimums may feel like another qualification requirement you must meet, they are actually beneficial for those seeking VA loans.

For one thing, they can help you gain a better sense of how much you can realistically spend on a house without struggling to make ends meet in other areas of your life. If you’re failing to meet the residual income minimum, chances are you should revisit your home buying budget and seek out a home that’s in a lower, more realistic price range. 

For another, these residual income guidelines established for VA home loans are a key reason why the foreclosure rate is so low for VA mortgages. 

If you’re looking for a VA home loan in New York State and you’d like help navigating the qualification requirements as well as ensuring that you satisfy the residual income minimums, contact Maple Tree Funding today! We know the ins and outs of VA home loans and we’d be happy to help you navigate the process of securing one from start to finish. 

Our team of mortgage professionals consists of a number of Certified Veterans Lending Specialists who are uniquely qualified to help veterans secure VA loans to finance their home purchases. This certification sets us apart from our competitors and shows that we truly know the ins and outs of VA mortgage options.

Give us a call today at 518-782-1202 or contact us online to get the conversation started! 

Looking to learn more about VA home loans?

The following resources are a great place to start: 

New York VA Mortgages from Maple Tree Funding – Review basic information about VA home loan benefits and what is involved in securing a VA mortgage, plus find out how Maple Tree Funding can help you along the way.

Guide to VA Home Loans – An overview of everything you need to know about VA home loans, from qualification guidelines and loan limits to how to obtain a DD214.

VA Mortgage FAQs – Find answers to frequently asked questions about VA mortgages from our NY VA mortgage experts.

Posted in Guide to VA Home Loans on Wednesday, December 7, 2022 by Shane Latza