VA Loan Residual Income Requirement

This BlOG On What Is VA Loan Residual Income Requirement Has Been Written By Gustan Cho

VA Loans is probably the best residential mortgage loan program in the U.S. However, VA Loans is only for Veterans who have served in the Armed Services of the U.S. with an honorable discharge and a Certificate of Eligibility.  VA Loans offers the followings:

  • VA Loan Programs are only available to Veterans of the U.S. Military with a Certificate of Eligibility
  • Zero down payment requirement. Home buyers can purchase a home with no money down and 100% financing
  • Mortgage Rates on VA Loans are one of the lowest out of all mortgage loan programs
  • No annual mortgage insurance premiums even with 100% Loan To Value
  • VA requires VA Funding Fee but the VA Funding Fee can be rolled into the VA Loan Balance
  • 100% Cash Out Refinance permitted with VA Loans
  • Veterans are eligible to purchase a one to four unit property with a VA Loan
  • The Department of Veteran Affairs, VA, does not mandate a minimum credit score
  • The Department of Veteran Affairs, VA, does not have a maximum debt to income ratio requirement
  • VA Loans have outperformed any other government loan programs such as FHA, USDA, and Conventional Loan programs, Fannie Mae and Freddie Mac. VA borrowers pay their VA Loans on time and default on VA Loans are much less than any other loan programs even though VA borrowers do not pay any money down on their home purchases.
  • VA Loans are easier to qualify than any other loan program. Again, you need to be a Veteran with a Certificate of Eligibility to qualify
  • One of the greatest benefits of being a Veteran of the United States Armed Services is the ability to be eligible for a VA Loan
  • Veterans who are eligible for VA Loan are under scrunity of VA Loan Residual Income Requirement

What Is VA Loan Residual Income Requirement?

The United States Department of Veteran Affairs, or VA, is one of the easiest mortgage loan programs to qualify for. Again, not everyone can qualify for a VA Loan. You need to be a Veteran of the United States Military with an active COE, which is short for Certificate of Eligibility. Here are two important characteristics of VA Loans:

  • VA does not require a minimum credit score. It is the VA Lenders that set minimum credit scores as a VA Lender Overlay. If you are interested in finding more about qualifying for a VA Loan With Low Credit Scores or VA Loans With Bad Credit, contact Gustan Cho at 262-716-8151 or email Gustan Cho at gcho@gustancho.com. Only overlays on VA Loans is a 580 FICO Credit Score
  • VA does not have a maximum debt to income ratio requirement. I have gotten approve/eligible per Automated Underwriting System on VA Loans with under 600 FICO Credit Scores and a 60% debt to income ratio. However, VA does consider residual income on factoring automated approvals

VA Loan Residual Income Requirement takes residual income on all VA Loans. Residual income under VA Guidelines is defined as the amount of funds that is readily available to the VA mortgage borrower after deducting all monthly expenses such as minimum monthly credit card debts, installment debts, student loans, auto loans, and mortgage payments from the VA borrowers monthly gross income. VA Loan Residual Income Requirement under the VA Loan Program, the VA borrower needs to have a certain amount of funds left over after the above deductions in order to cover other expenses not used in the calculation of the VA borrower debt to income ratio which is called Residual Income. Examples of other expenses that needs to be covered with Residual Income are the following:

  • Groceries
  • Fuel
  • Utilities
  • Child Care
  • Savings and Reserves
  • Health and Auto Insurance
  • Cell Phone Bills
  • Internet and Cable Services
  • Entertaiment and Vacations
  • Other Miscellaneous Expenses

Residual Income is normally calculated on the number of folks in the household of the Veteran borrower as well as the part of the country the home is located. The areas are classified as the following:

  • Northeast
  • Midwest
  • South
  • West

VA Loan Residual Income Requirement sets for VA Loans of under and over $79,999. The main reason for VA Loan Residual Income Requirement is because the Department of Veterans Affairs wants to make sure that the Veteran borrower has enough money readily available for everyday expenses such as groceries, cable, internet, utilities, child care, health care, on top of their VA Loans. This is one of the main reasons why VA Loans have one of the lowest default rates out of any loan program.

How Can You Get An Automated Approval On A VA Loan With Low Credit Scores And High DTI?

As I mentioned earlier, I got an approve/eligible per Automated Underwriting System on a borrower with a 580 FICO Credit Score, 60% debt to income ratio, and open outstanding unpaid collections accounts. How is that possible? Here is why:

  • VA does not have minimum credit score requirements
  • VA does not have a maximum debt to income ratio requirement as long as the VA borrower has sufficient residual income
  • This borrower met all of the above requirements especially the sufficient VA Loan Residual Income Requirement

The key for sufficient residual income is the more income the VA borrower makes, the more residual income a borrower has. For example, lets take a case scenario:

  • VA borrower total housing and monthly payments are $3,000 and VA borrower has monthly gross income of $5,000. 60% debt to income ratio with $2,000 in residual income
  • VA borrower total housing and monthly payments are $6,000 and VA borrower has monthly gross income of $10,000. 60% debt to income ratio with $4,000 in residual income
  • The borrower with the higher monthly gross income has more residual income so VA will consider the borrower with more residual income a stronger borrower and the Automated Underwriting System will likely favor the borrower with a larger residual income and the chances of getting an approve/eligible per Automated Underwriting System at 60% DTI and 580 FICO credit scores is likely.

If you have any questions on VA Loans and need a VA Lender who has no lender overlays, please contact Gustan Cho at 262-716-8151 or email The Gustan Cho Team at gcho@gustancho.com. We are available 7 days a week, evenings, weekends, and holidays.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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