Did You Know VA Loans Consider Child Care To Insure You are Comfortable with Your Mortgage?

When you’re buying a home with a VA loan, it’s easy to focus on interest rates and forget the quieter numbers that really decide whether the payment fits your life: your debt-to-income (DTI) ratio and residual income.

If you have kids, there’s one line item that can move the needle in a big way: child care.

Below is a Veteran-friendly walkthrough of how VA lenders look at child care, how it flows into DTI and residual income, and why it matters for your approval and long-term comfort.

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VA 101: DTI vs. Residual Income (and Why VA is Different)

Debt-to-Income (DTI) Ratio

• DTI = your total monthly debts ÷ your gross monthly income.

• Debts include things like:

  • Future VA mortgage payment (principal, interest, taxes, insurance, HOA)

  • Car loans, student loans, credit cards, personal loans

  • Certain other recurring obligations – including child care. 

The VA’s handbook tells lenders that if your DTI is above 41%, it isn’t an automatic denial—but it requires closer scrutiny and compensating factors. 

Residual Income

• Residual income is what’s left over after your key expenses are paid.

• VA defines it as net effective income minus monthly shelter expense, and then compares it to minimums based on:

  • Region of the country

  • Family size

  • Loan amount 

VA is unique because residual income often matters more than DTI. A higher-than-41% DTI can still be OK if your residual income is strong enough.

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How VA Treats Child Care in Your DTI

The VA is very clear: child care is a real monthly obligation and must be counted.

• In VA’s own FAQ, they state that child care expenses are considered a debt and must be documented. homeloans.va.gov

• Lenders typically:

  • Ask if you have children (especially under age 12).

  • Request a child care statement or letter:

    • How much you pay monthly, or

    • A detailed explanation if you don’t have a child care expense (for example, a spouse at home, relatives caring for the child, or school-age children). 

  • List this expense on the VA Loan Analysis form as a job-related expense.

In practice, that means:

• If you pay $800/month to daycare, that $800 is added to the “monthly obligations” used in your DTI calculation. 

• If you genuinely do not pay for child care, the lender still needs a written explanation of why (and that explanation must make sense given your move and work situation). 

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A Simple Example: How Child Care Changes Your Numbers

Let’s say:

• Gross income: $7,000/month

• Other monthly debts (car, cards, etc.): $800

• Projected VA house payment (PITI+HOA): $2,200

Scenario A – No child care expense

• Total debts = $2,200 + $800 = $3,000

• DTI = $3,000 ÷ $7,000 ≈ 43%

Scenario B – $800/month daycare

• Total debts = $2,200 + $800 + $800 = $3,800

• DTI = $3,800 ÷ $7,000 ≈ 54%

Same income. Same house. The only change is daycare, and suddenly your DTI jumps into a range where the underwriter has to lean heavily on residual income and compensating factors.

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How Child Care Flows Into Residual Income

Residual income is where VA really protects Veterans.

To get your residual income, the lender starts with your net effective income and subtracts:

• Your VA house payment

• Other debt payments

• Child care expenses

• Estimated taxes and typical living expenses

What’s left over is your residual income, which is then compared to VA’s tables for your region, family size, and loan amount. 

Because kids bring higher monthly living costs (food, clothes, activities, etc.), the VA’s residual income tables require more leftover money for larger families. Child care is one of the ways the underwriter realistically accounts for that.

If your residual income is below the guideline:

• It can be a stand-alone reason to deny the loan, even if your DTI looks reasonable. 

If your residual income is strong:

• It can help offset a higher DTI—one reason VA loans are often more flexible than conventional loans.

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Why Child Care Really Matters – Beyond Just Math

1. It Keeps You From Becoming “House Poor”

The point of counting child care isn’t to punish parents—it’s to avoid setting you up for a budget that’s so tight you’re stressed every month.

• VA wants to see that after:

  • Mortgage

  • Car payments

  • Credit cards

  • Daycare

• You still have enough left for:

  • Food, gas, utilities

  • Kids’ activities

  • Life’s surprises 

That’s part of why VA has one of the lowest default rates among major loan types.

2. It Shapes How Much House You Can Comfortably Buy

If daycare is eating a big chunk of your monthly budget, it may:

• Lower the maximum purchase price you qualify for, or

• Push you toward:

  • A slightly smaller home

  • A different area with lower taxes/insurance

  • Or waiting until daycare costs drop.

This isn’t bad news—it’s honest math that helps you avoid regrets later.

3. Your Future Plans Matter – And You Can Document Them

Because VA underwriting looks at what life will look like after you close, your plans around child care can matter, if they’re realistic and supportable.

Examples:

• A spouse is leaving the workforce to stay home with the kids after the move.

• Your child starts kindergarten next school year, converting paid daycare to before-/after-school care at a lower cost.

• You’re moving closer to family who will provide care at no cost.

In these situations, your lender can often use updated, credible child care figures and a detailed letter to model your future budget more accurately—rather than assuming today’s high daycare bill continues forever. 

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4. It Can Guide Smart Strategy: Timing, Debt Pay-Down, and Structure

Knowing that daycare is counted gives you room to be strategic:

• Debt pay-down:
  Target a car loan or credit card first to free up room in your DTI and residual.

• Timing your purchase:
  If daycare costs are about to drop, planning your home search around that change can improve your approval odds.

• Loan structure and location choices:
  Sometimes a slightly lower price point or a neighborhood with lower taxes and insurance makes the numbers work without sacrificing lifestyle.

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What You Can Expect When You Apply

When you apply for a VA loan and have children, be ready to:

• List your monthly child care expense, if any.

• Provide a written statement that:

  • Confirms the monthly amount you pay, or

  • Explains why you don’t pay for child care (and how care is provided instead).

• Talk through your future plans for child care after you move.

None of this is meant to trip you up. It’s your lender’s way of making sure your new payment works with real life—not just a spreadsheet.

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Next Step: Let’s Run Your Numbers Together

If you’re a Veteran or active-duty service member thinking about buying a home and you’re wondering:

• “Can I qualify with our daycare bill?”

• “Will our child care situation after we move help or hurt?”

• “How much house fits our budget and VA’s DTI/residual rules?”

…this is exactly the kind of planning conversation I love to have.

I’ll walk you through:

• Your current DTI with and without child care changes,

• Your estimated residual income based on region and family size,

• And a realistic price range that keeps your family comfortable, not over-extended.

Expenses That Usually Count as Child Care

Lenders will normally treat these as child care expenses if they’re regular and needed so the parent can work or attend school:

• Daycare / Childcare Centers

  • Full-time or part-time daycare

  • Preschool programs that function like daycare so you can work

• In-Home Babysitting / Nannies

  • A nanny or sitter you pay regularly (weekly/monthly)

  • Au pair or live-in caregiver whose purpose is child care

• Before/After-School Care

  • School-based before- and after-care programs

  • Private programs (YMCA, church, etc.) used so the parent can work their schedule

• Summer Camps / Holiday Programs

  • If used consistently in place of daycare so you can work

  • Many underwriters will “average out” known, recurring seasonal costs into a monthly figure if they materially affect affordability

• Third-Party Care So Parent Can Attend School/Training

  • If a parent is in school or vocational training and child care is required for them to attend

The key themes:

• It’s paid (not free help).

• It’s recurring (not a one-off date night).

• It’s tied to the ability to work or attend school.

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Expenses That Typically Do NOT Count

These usually do not get listed as a child care debt for VA underwriting, even though they’re real costs of raising kids:

• Free Care from Family/Friends

  • Grandma watches the kids at no charge

  • A trusted friend or neighbor helps at no cost

• A Stay-at-Home Parent

  • One spouse stays home and provides child care themselves (no payment to a third party)

• Occasional or Irregular Babysitting

  • Infrequent date-night sitters

  • One-off events not part of your regular work/commute schedule

• Normal Kid Expenses (these are assumed inside residual income, not listed as “child care”)

  • Food, clothing, school supplies

  • Sports, activities, lessons, field trips

Even when there’s no paid child care, VA wants the file to show how the kids are cared for (for example, “Spouse is full-time homemaker and provides care,” or “Grandparent provides daily care at no cost”).

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How This Shows Up in the VA File

In a VA file, you can expect:

• A question like:

  “Do you have any child care expenses? If yes, how much per month?”

• If yes:

  • The monthly amount is listed as a recurring obligation and included in DTI and residual income calculations.

• If no:

  • A brief written statement explaining why:

    • Stay-at-home spouse

    • Free family care

    • Children are old enough not to require care, etc.

This isn’t just paperwork—VA and the lender are making sure your budget reflects the real-world cost of caring for your kids, so your mortgage stays comfortable long term.

About Between Two Doors

Between Two Doors is a podcast where Nate talks to Realtors and other influencers in the communities that he serves as a mortgage loan advisor.  He has conversations about the guest's journey, aiming to connect home buyers and sellers with Realtors on a more personal level. He 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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