Welcome to our informative article about VA loan residual income charts! For those of you who are unfamiliar with this topic, it refers to the amount of money a borrower has left over after all debts and expenses have been paid. This calculation is used to determine if a borrower is able to afford their mortgage payments. Understanding how this works is essential for anyone who wants to take advantage of VA loan benefits. So, read on to learn more about va loan residual income charts and how they can impact your VA loan application process.
What is a VA Loan Residual Income Chart?
A VA loan residual income chart is a paperwork which is used to determine a borrower’s ability to repay their VA loan after they’ve paid all their monthly expenses. The Department of Veterans Affairs (VA) created this chart to help lenders assess the financial strength of VA loan applicants. By comparing their income to their expenses, lenders can determine whether the applicant has enough money left over to comfortably make their mortgage payments.
Why is a VA Loan Residual Income Chart Important?
VA loan residual income charts are important because they help to ensure that borrowers don’t overextend themselves financially. By evaluating a borrower’s overall financial situation, lenders can help ensure that borrowers are able to keep up with their mortgage payments long-term. This reduces the risk of default and foreclosure, which benefits both the borrower and the lender.
How are VA Loan Residual Income Charts Calculated?
The calculation for a VA loan residual income chart is relatively simple. Lenders take the borrower’s monthly income and subtract all their monthly expenses, including debts and living expenses. The residual income is the amount of money the borrower has left over each month after all expenses have been paid. Lenders use this information to help determine whether the borrower can afford their mortgage payments and other expenses.
What are the Minimum Residual Income Requirements for VA Loans?
VA loan residual income requirements vary depending on a number of factors, including the size of the borrower’s family and their location. In general, however, VA lenders look for borrowers to have a residual income of at least 120% of the poverty guideline for their family size and location. For example, a family of four living in New York City would need to have a residual income of $1,021 per month, based on the 2021 poverty guidelines.
How can a VA Loan Residual Income Chart Impact my Loan Application?
If your residual income is lower than the minimum requirement for your family size and location, you may have difficulty obtaining a VA loan. This is because lenders are required to ensure that borrowers have enough income to make their mortgage payments and still meet their other financial obligations. If your residual income is too low, lenders may view you as a higher risk borrower and deny your loan application.
How can I Improve my Residual Income?
If your residual income is too low to qualify for a VA loan, there are several steps you can take to improve your financial situation. These may include paying down debts, cutting back on discretionary spending, or finding ways to increase your income. You may also want to work with a financial advisor or credit counselor to help you create a budget and develop a plan to improve your finances.
What Other Factors Do Lenders Consider When Evaluating VA Loan Applications?
In addition to residual income, VA lenders consider a wide variety of factors when evaluating VA loan applications. These may include the borrower’s credit score, debt-to-income ratio, employment history, and more. To increase your chances of being approved for a VA loan, it’s important to have a strong financial profile and demonstrate your ability to repay the loan.
VA Loan Residual Income Chart Table
Family Size |
Region |
Minimum Residual Income |
|---|---|---|
1 |
Northeast |
$450 |
2 |
Northeast |
$755 |
3 |
Northeast |
$909 |
4 |
Northeast |
$1,025 |
5+ |
Northeast |
Add $80 for each additional member up to a family of seven |
1 |
Midwest |
$441 |
2 |
Midwest |
$738 |
3 |
Midwest |
$886 |
4 |
Midwest |
$1,005 |
5+ |
Midwest |
Add $80 for each additional member up to a family of seven |
1 |
West |
$491 |
2 |
West |
$823 |
3 |
West |
$990 |
4 |
West |
$1,117 |
5+ |
West |
Add $80 for each additional member up to a family of seven |
1 |
South |
$441 |
2 |
South |
$738 |
3 |
South |
$886 |
4 |
South |
$1,005 |
5+ |
South |
Add $80 for each additional member up to a family of seven |
FAQs About VA Loan Residual Income Charts
1. What is residual income?
Residual income is the amount of money a borrower has left over after all expenses have been paid, including debts and living expenses.
2. Do all lenders use VA loan residual income charts?
No, not all lenders use VA loan residual income charts. However, those who participate in the VA loan program are required to use them.
3. How can I calculate my residual income?
To calculate your residual income, subtract all your monthly expenses, including debts and living expenses, from your monthly income.
4. What happens if my residual income is too low?
If your residual income is too low, you may have difficulty qualifying for a VA loan. You may need to work on improving your financial situation before applying.
5. Can I use a co-borrower to increase my residual income?
Yes, using a co-borrower can help increase your residual income, as their income can be factored into the equation.
6. What is the poverty guideline?
The poverty guideline is a set of income thresholds published annually by the U.S. Department of Health and Human Services. It is used to determine eligibility for certain federal programs.
7. Can I still qualify for a VA loan if my residual income is lower than the minimum requirement?
It’s possible to still qualify for a VA loan with a lower residual income, but you’ll need to provide additional documentation and prove that you have other sources of income or assets that can be used to repay the loan.
8. How can I find a lender who participates in the VA loan program?
You can search for VA-approved lenders on the Department of Veterans Affairs website or contact a local VA office for assistance.
9. What is the debt-to-income ratio?
The debt-to-income ratio is the amount of debt a borrower has relative to their income. Lenders use this ratio to help determine whether the borrower can afford their mortgage payments and other financial obligations.
10. What is an appraisal?
An appraisal is an evaluation of the value of a property. Lenders require appraisals to ensure that the property is worth the amount of the loan.
11. How long does it take to get approved for a VA loan?
The approval process for a VA loan can vary depending on the lender and the borrower’s financial situation. However, it typically takes between 30 and 45 days.
12. What if I have bad credit?
Having bad credit can make it more difficult to qualify for a VA loan, but it doesn’t necessarily disqualify you. You may need to provide additional documentation or work with a lender who specializes in working with borrowers with poor credit.
13. Can I use a VA loan more than once?
Yes, you can use a VA loan more than once, as long as you meet the eligibility requirements.
Conclusion
Now that you understand va loan residual income charts, you can use this knowledge to your advantage when applying for a VA loan. By ensuring that you meet the minimum residual income requirements, you’ll increase your chances of being approved for a loan and reduce your risk of default. If you need help improving your financial situation or have additional questions about VA loans, don’t hesitate to reach out to a financial advisor or VA-approved lender.
Closing Disclaimer
The information provided in this article is for informational purposes only and should not be considered legal or financial advice. We strongly encourage readers to consult with a qualified financial advisor or lender before making any financial decisions.