Residual income refers to the money you have left over after paying necessary monthly expenses, such as mortgage payments, healthcare, and utilities. Residual income is an important concept because it determines VA loan eligibility. In order to qualify for a VA loan, you must meet the required residual income thresholds.
This money typically gets set aside for discretionary expenses, like food, clothing, entertainment, etc. For instance, if your income is $5,000 and your necessary expenses are $3,500, your residual income would be $1,500.
Using our VA loan residual income calculator, you can calculate your residual income to see if you qualify.
VA residual income calculator
Your residual income is how much money you have left over each month after settling debts and other obligations. Your residual income typically must exceed the VA residual income chart values to qualify for a VA-backed loan.
The VA uses residual income to ensure active-duty service members and veterans have enough money in their accounts to cover daily living expenses after making mortgage payments.
Lenders typically calculate residual income for you, but you can use our VA loan residual income calculator to figure it out on your own. Here is the basic formula:
- Residual income = Gross monthly income - necessary monthly expenses (e.g., mortgage payments, utilities, credit cards, etc.)
Let’s look at a specific example with numbers to make the concept clear. Say your monthly gross income is $5,000, and your fixed monthly expenses are as follows:
- Mortgage payment: $2,000
- Car payment: $600
- Student loan payment: $400
- Childcare costs: $300
- Credit card payments $200
- Taxes/utilities/insurance: $500
- Total monthly expenses: $4,000
In this case, your residual income would be: $5,000 - $4,000 = $1,000.
VA residual income charts 2025: How much do you need?
Your residual income generally must meet specific thresholds in order to qualify for a VA loan. These income thresholds differ depending on the loan size, where you live, and the size of your family.
Below are the current 2025 VA residual income charts and thresholds from the VA Lenders Handbook[1]:
VA loan amounts under $79,999
| Family Size | Northeast | Midwest | South | West |
| 1 | $390 | $382 | $382 | $425 |
| 2 | $654 | $641 | $641 | $713 |
| 3 | $788 | $772 | $772 | $859 |
| 4 | $888 | $868 | $868 | $967 |
| 5 | $921 | $902 | $902 | $1,004 |
For family sizes over 5, add an additional $75 for each member up to a total of 7.
VA loan amounts over $80,000
| Family Size | Northeast | Midwest | South | West |
| 1 | $450 | $441 | $441 | $491 |
| 2 | $755 | $738 | $738 | $823 |
| 3 | $909 | $889 | $889 | $990 |
| 4 | $1,025 | $1,003 | $1,003 | $1,117 |
| 5 | $1,062 | $1,039 | $1,039 | $1,158 |
For family sizes over 5, add an additional $80 for each member up to a total of 7
For example, say you have a family size of three and want a $75,000 loan in Missouri (Midwest).
According to the chart, you’d need a residual income of $772 to qualify.
Alternatively, imagine you have a family size of 5 and want a $100,000 loan in New York (Northeast). Then you’d need at least $1,062 left over each month.
Keep in mind that these thresholds function as guidelines and aren’t absolute. Having a residual income below the recommended amount doesn’t automatically disqualify you from a loan.
Instead, lenders consider thresholds in conjunction with other credit factors when issuing VA-backed mortgages.
What to do if you can’t meet the VA residual income requirements
Residual income thresholds are not mandatory, but meeting them can increase your chances of securing a favorable loan.
If you don’t currently meet the thresholds, here are some strategies:
- Reduce expenses: You can reduce monthly expenses by cutting discretionary spending or selling certain assets, like vehicles.
- Increase income: Increasing your income can help you meet thresholds, but the VA also has income history requirements to meet underwriting standards.
- Get an FHA loan: Federal Housing Administration (FHA) loans don’t have residual income requirements. However, unlike VA loans, FHA loans require a down payment and private mortgage insurance.
- Refinance debt: You can also refinance high-interest debt to get a lower rate and lower monthly payments, freeing up more discretionary income.
- Add a co-borrower: Lenders will consider the income and assets of co-borrowers, so adding one can help you meet the income thresholds.
- Wait for expenses to drop: If you are close to paying off a recurring expense, like a credit card bill, you can wait to apply for a loan when your income frees up.
Lenders look at multiple factors to judge creditworthiness, such as cash reserves and a higher down payment.
How is VA residual income calculated?
After all this, you’re probably wondering: “So, how do I calculate residual income for VA loans?”
Calculating residual income involves taking your gross pre-tax monthly income and subtracting all fixed expenses and obligations. Here’s what it looks like step by step:
- Determine gross income: Calculate your gross income by adding up all sources of regular monthly income, like hourly pay, salary, commissions, etc.
- Subtract fixed monthly expenses: These include fixed expenses like loan payments, credit card debt, childcare costs, insurance, and taxes.
- Subtract expected VA mortgage payment: Make sure your anticipated mortgage payment accounts for taxes and homeowner’s insurance.
Calculate residual income: After subtracting monthly expenses and your expected mortgage payment, the remaining number is your residual income.
Residual income is related to but distinct from your debt-to-income (DTI) ratio. DTI is equal to your total expenses divided by your total income.
Residual income is the actual cash left over after accounting for debts and other necessary expenses. All housing loans consider DTI, but only VA loans have residual income thresholds.
Debt-to-income ratio for VA loans
DTI ratios can have an impact on whether you meet residual income requirements. If your DTI is larger than 41%, you generally need to make at least 120% of the residual income threshold to qualify.
For instance, if your DTI is 60% and you want a $150,000 loan in the Northeast for a family of five, your residual income would need to be $1,274 instead of $1,062. The higher residual income threshold is meant to ensure that borrowers with larger debt burdens can still meet their daily expenses.
The VA recommends a DTI threshold of 41%, but you can get a VA-backed loan with a DTI up to 60%. Borrowers with a higher DTI can still qualify if they have other compensating factors, like more residual income or substantial cash savings.
Ready to buy with a VA loan?
Residual income plays a crucial role in whether you qualify for a VA loan, so you’ll want to be sure you meet the thresholds.
Increasing your residual income gives you better chances of approval, so you may want to reassess your finances and reduce expenses if you are currently under the limit.
You can use our residual income calculator or connect with VA-approved lenders to see if you prequalify. A real estate agent is a great first resource for buyers, and you can find agents familiar with VA buyers through Clever by filling out a quick quiz to meet expert agents in your area.
FAQ
What is VA residual income?
Residual income measures your monthly net income after accounting for necessary expenses, like mortgage payments, taxes, loans, credit cards, etc. Lenders use residual income estimates to judge whether applicants qualify for VA-backed loans.
How do I calculate VA residual income?
You can determine your VA residual income by calculating your gross monthly income and subtracting necessary monthly expenses. For instance, with a gross monthly income of $5,000 and $3,500 in monthly expenses, residual income would be $5,000-$3,500 = $1,500
How much residual income does a VA loan require?
VA residual income thresholds depend on where you live, the amount of the loan, and the size of your family. The greater the loan or the more family members, the higher the required income level. These requirements are not mandatory but are set by the VA to guide lender behavior when assessing creditworthiness.
Does residual income replace DTI for VA loans?
No, residual income does not replace debt-to-income measures for VA loans. Lenders still look at your DTI for VA loans — they just also look at residual income as well. The VA has residual income measures to make sure borrowers can still afford daily living expenses after accounting for mortgage costs.
What does 120% residual income mean?
A 120% residual income means your residual income is 120% of the required value. You typically need 120% of the relevant residual income threshold if your DTI is greater than 41%.
Is residual income before or after taxes?
Residual income is the money you have left after accounting for all obligations, including taxes. Calculations use your gross income, which is your total pre-tax income. You subtract taxes from your gross income when calculating your residual income.
How important is the residual income analysis?
Residual income matters, but it’s not the end-all, be-all for VA loan eligibility. You can still qualify for a VA loan while under the residual income level if you have a lower DTI, cash savings, or a larger down payment.