Residual Income and VA Loans
If you are applying for a VA mortgage loan, you have to keep in mind that your lender will use something called residual income when qualifying you for the home loan.
The residual income calculation is the "realistic income" that you have remaining after your monthly debts are paid.
The way it's calculated is we start by looking at your gross income and then add in any housing allowance.
Then, taxes, the mortgage payment, your other debts, utilities and child care are subtracted. What's left is the residual income.
The residual income required for loan approval depends on the area where you live and the number of people in your household.
Here is a chart that shows the minimum residual income required by area. Here in Ohio, we use the Midwest region's figures.
Residual income chart with 2020 guidelines
In conclusion, residual income is a calculation of your realistic cashflow and a very important piece of the qualification process. If you have any questions, please do not hesitate to reach out.
