Residual Income Guidelines
Residual income guidelines are unique to the VA program. When the lender considers an application for approval, the lender takes into consideration the specific family size, property size, regional location and your debt-to-income ratio (DTI) of approximately 41% to 45% of your gross income.
As an example, an individual purchasing a home may not have a large family to support so net earnings will go further than an applicant with a large family to support. In this case, the DTI can be expanded well beyond the 41% guideline.
Residual income is calculated by using the gross monthly income of the applicants, and then deducting the following expenses from that income:
- State taxes
- Social security
- Federal taxes
- Proposed new monthly house payment (PITI: principle, interest, taxes and insurance)
- Estimated maintenance and utilities
- Monthly child care expense
- Alimony or child support
- Monthly consumer debt payments: installment and revolving credit cards