Residual income is the amount of money a borrower has left over each month after paying all major expenses.

For VA loans, this includes subtracting:

• Mortgage payment (principal, interest, taxes, insurance)

• Monthly debts (car loans, credit cards, student loans)

• Estimated utilities

• Basic housing costs

What’s left after those expenses is your residual income.

Unlike conventional loans that focus heavily on debt-to-income (DTI), the VA looks at whether a veteran can comfortably afford daily life after buying a home.

This approach was designed to:

• Reduce financial stress on military families

• Lower default risk

• Make homeownership more sustainable for veterans

That’s one of the biggest advantages of the VA loan program.

The VA sets minimum residual income requirements based on:

1. Household size (number of people living in the home)

2. Region of the country (cost of living differences)

3. Loan size (over or under $80,000)

The larger the household or higher the cost of living, the higher the required residual income.

Residual income can:

• ✅ Offset higher DTI ratios

• ✅ Help veterans qualify with lower credit scores

• ✅ Strengthen approvals for zero-down VA loans

• ✅ Give underwriters confidence in real-world affordability

In many cases, strong residual income can approve a VA loan when other loan programs decline it.

❌ It’s NOT your savings account
❌ It’s NOT your gross income
❌ It’s NOT the same as DTI

✅ It’s about monthly breathing room after the bills are paid

• ✔ Can help veterans qualify even with higher DTI

• ✔ Supports zero-down VA home loans

• ✔ Looks at real-life monthly comfort, not just numbers on paper

• ✔ One of the biggest advantages of using a VA loan

If you meet the residual income requirement, you may qualify for a VA loan even when other loan programs say no.

Bottom Line for Service Members

If you have enough residual income:

• You may qualify even if your DTI looks high

• You may qualify even if another lender said no

• You may qualify for a zero-down VA home loan

Residual income is one of the VA loan program’s most powerful—and misunderstood—benefits.