If you’re applying for a VA loan, there’s one requirement that many veterans don’t hear about until later: residual income. What is it, and why does it matter when you’re buying a home?
In today’s video, we’re taking a look at what residual income is, why the VA requires it, and how it impacts your eligibility for a VA loan. Trust me, this is one of the most important factors to understand if you want to increase your chances of approval.
First, let’s break down residual income. It’s a concept that the VA uses to make sure you have enough money left over each month after your mortgage and debts are paid—money for things like food, gas, entertainment, and unexpected expenses.
In other words, it’s the money you’ll have for the day-to-day things that aren’t covered by your mortgage payment. The VA wants to ensure you’re not stretching your budget too thin and that you’ll have enough to live comfortably.
Now, the VA sets specific guidelines for how much residual income you need, and it varies depending on factors like the size of your family, where you live, and the loan amount.
For example, a single veteran with no dependents in a lower-cost area may need around $1,000 to $1,200 of residual income each month. But for a large family in a high-cost area, the requirement could be $2,000 or more.
So why does the VA care about this? Well, they want to make sure that you’re financially stable enough to handle life’s unexpected costs, like medical bills, car repairs, or other emergencies that could pop up.
Residual income is a unique part of the VA loan process that you won’t find with other loan types. It’s designed to protect you—making sure you’re not house-poor and that you’ll have the financial breathing room to live comfortably.
But don’t stress! If your residual income doesn’t meet the requirement, there are still ways to get approved. Some lenders may allow compensating factors, like a larger down payment or a higher credit score, to offset a lower residual income.
So, here’s a quick recap: Residual income is what’s left after all your bills are paid, and the VA uses it to ensure you have enough money for life’s essentials. It varies by family size, location, and loan amount, but it’s a key piece of the VA loan puzzle.
Thanks for tuning in today! If you found this video helpful, give it a thumbs up, comment with any questions below, and make sure to subscribe for more tips on VA loans and homeownership.
And as always, be sure to talk to a professional who can help guide you through the process!
