VA Loans: Why Residual Income Matters More Than Debt To Income Ratios

 


Hey my fellow Veterans and active duty — did you know that one of the most unique features of the VA Home Loan program is how it looks at your residual income instead of just your debt-to-income (DTI) ratio?  

This is a big deal. Most other loan programs rely heavily on DTI — a calculation of how much of your income goes toward debt. VA, however, takes it one step further by asking:

After you’ve paid your mortgage, utilities, car payment, credit cards, and other monthly obligations — how much money is left over to support your household?

That leftover money is called residual income.

Why VA Uses Residual Income

The Department of Veterans Affairs recognizes that military families often have unique financial situations. Between relocations, variable housing costs, and family sizes that can shift with deployments, VA wants to make sure borrowers have enough cushion to cover real-life expenses.

Residual income guidelines are based on:

  • Family size – The more dependents, the higher the required cushion.

  • Region of the country – Living costs differ between places like Texas and Colorado.

  • Loan size – Larger loans come with higher expectations for reserves.

Flexibility That Helps You Qualify

Because of this approach, a Veteran with a higher DTI might still get approved if they have strong residual income. That flexibility is one reason VA loans consistently show some of the lowest foreclosure rates in the country — they measure what really matters: your ability to maintain your lifestyle after the bills are paid.

What This Means for You

If you’re looking to buy in Texas, Florida, Alabama, Colorado, or Tennessee, this is a huge advantage. Instead of worrying about squeezing into a DTI box, focus on showing your lender your true budget picture.

Pro Tip: When planning, look at your monthly spending beyond debts — groceries, gas, childcare. If you’ve got strong residual income, you may be more mortgage-ready than you think.

Veterans and active duty, the VA Loan was built with you in mind. Flexible, fair, and focused on keeping you in your home long-term.

#MortgageTips #TX #FL #AL #CO #TN #VALOAN

About Between Two Doors

Between Two Doors is a podcast where I talk with Realtors about their journey, aiming to connect home buyers and sellers with agents on a more personal level. I ask "right brain" questions that go beyond transactions, focusing on the experiences, values, and passions that make these professionals great at what they do.

Listen to more episodes at: https://www.betweentwodoors.com

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