What is residual income on a VA loan
Most loans judge you almost entirely on your debt-to-income ratio, a percentage on paper. The VA adds a second test that thinks like a household instead of a spreadsheet: after every bill is paid, is there enough actual money left for groceries, gas, clothes, and life? That leftover amount is residual income.
This one rule changes who gets approved. A borrower with a 45% DTI and a big surplus of real income can pass. A borrower with a clean 38% DTI but nothing left at the end of the month can fail. Lenders run this exact arithmetic on every VA file, which is why the calculator above matters more than any prequalification quiz.
The official VA residual income charts
These are the VA's own tables from the Lenders Handbook. Find your region below, then your family size. Note that the requirement is higher on loans of $80,000 or more, which is nearly every purchase today.
Loans of $80,000 and above
| 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 |
Loans under $80,000
| 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 5, add $80 for each additional member up to a family of 7. The regions: Northeast is CT, ME, MA, NH, NJ, NY, PA, RI, VT. Midwest is IL, IN, IA, KS, MI, MN, MO, NE, ND, OH, SD, WI. South is AL, AR, DE, DC, FL, GA, KY, LA, MD, MS, NC, OK, SC, TN, TX, VA, WV. West is AK, AZ, CA, CO, HI, ID, MT, NV, NM, OR, UT, WA, WY.
How to calculate residual income, step by step
- Start with gross monthly income, including BAH and BAS if you are active duty.
- Subtract monthly federal, state, and FICA taxes.
- Subtract the full new housing payment: principal, interest, taxes, insurance, and HOA.
- Subtract recurring debts: car payments, credit card minimums, student loans, child support.
- Subtract childcare costs.
- Subtract home maintenance and utilities, which lenders estimate at 14 cents per square foot per month. A 2,000 square foot home costs $280 here.
- Whatever remains is your residual income. Compare it to your chart number above.
The 41% rule most calculators miss
When your debt-to-income ratio goes above 41%, the VA does not automatically reject you the way other loans would. Instead it raises the bar: your residual income must beat the chart minimum by 20%. A family of 3 in the South then needs $1,067 instead of $889. This is exactly how a strong earner with a high DTI still closes a VA loan, and it is built into the calculator above.
A worked example
A family of 3 in Texas. Gross income $7,000 per month, about $1,350 in taxes. New housing payment $2,400, car and cards $650, no childcare, 2,000 square foot home so $280 in maintenance. Residual: 7,000 minus 1,350 minus 2,400 minus 650 minus 280 equals $2,320. The South chart says a family of 3 needs $889. Their DTI is 43.6%, over the 41% line, so the requirement rises 20% to $1,067. They clear it by $1,253 and pass with room to spare, even though a conventional lender staring at a 43.6% DTI might have said no.
What to do if you fail the test
- Lower the target price. Every $25,000 off the price cuts the payment roughly $150 and adds it straight to residual.
- Pay off one debt. Killing a $300 car payment adds $300 to residual and drops DTI at the same time. This is the highest-leverage move.
- Check your funding fee exemption. A disability rating of 10% or higher removes the fee from the loan and trims the payment.
- Count all income. BAH, BAS, disability pay, and a co-borrower's income all raise the top line.
- Buy a smaller home. Less square footage literally lowers the maintenance line in the formula.
- Use the near-base reduction. Active duty and retirees who regularly use base facilities can qualify for a 5% lower requirement.
- Wait one raise. Residual income is monthly. A $500 raise is $500 more residual, every month.
Frequently asked questions
Is residual income the same as debt-to-income ratio?
No. DTI is a percentage of gross income. Residual income is actual dollars left after taxes, housing, debts, childcare, and maintenance. The VA checks both, and residual income is the one that decides close calls.
Who counts in my family size?
Everyone living in the household: you, a spouse, and dependents, whether or not they earn income. A lender may exclude a non-borrowing spouse's requirement in limited cases if their income is documented, but plan with everyone counted.
Does my spouse's income help even if they are not on the loan?
Generally income only counts from borrowers on the loan. A non-borrowing spouse's debts in community property states, however, can count against you. Adding a working spouse as co-borrower usually helps both DTI and residual.
What DTI is too high for a VA loan?
There is no hard VA ceiling. Above 41%, the residual requirement rises 20% and the file gets more scrutiny. Files have closed above 50% DTI with strong residual income, reserves, and credit history.
Do BAH and BAS count as income for residual purposes?
Yes, fully. They are also tax-free, which helps twice: they raise gross income without raising the tax deduction that comes out of it.
Why 14 cents per square foot?
It is the standard lender estimate for maintenance and utilities in the residual calculation, from VA underwriting guidance. Bigger homes cost more to heat, cool, and repair, and the formula accounts for that.
Where do these charts come from?
VA Pamphlet 26-7, the Lenders Handbook, Chapter 4. They are the same tables underwriters use. If the VA updates them, this page updates the same week.
I pass residual but my lender still said no. Why?
Residual income is one gate, not the whole approval. Credit history, payment history, employment stability, and lender overlays all still apply. Passing here means the core VA math works, which is the right first step.