What are the VA Residual Income Requirements?
VA residual income is the money you have left each month after taxes, debts, housing costs and basic upkeep. The VA sets a minimum that depends on your loan amount, family size and region. California is in the West region. Lenders weigh it together with your credit and debt-to-income ratio, not on its own.
Key Takeaways
- Residual income checks that you can cover everyday living costs after your debts and housing payment. It is separate from debt-to-income ratio.
- For California, the VA uses the West region. The minimum depends on loan amount ($79,999 and under, or $80,000 and up) and the number of people in your household.
- The common debt-to-income guideline is 41%. Above that, residual income must exceed the guideline by 20%.
- If you or your spouse is active duty or retired and will keep using military facilities near the home, the requirement is reduced by 5%.
What is VA residual income?
Residual income is your gross monthly income minus taxes, the housing payment, other debts and maintenance and utilities. What remains must cover food, health care, clothing, transportation and other regular expenses. It is an extra safety check that the VA built into its loans. It is part of why VA loans have strong performance despite low down payments.
How is residual income different from debt-to-income?
Debt-to-income (DTI) compares your monthly debts to your monthly income. Residual income measures what is left in dollars. Two borrowers with the same DTI can have very different residual income if one has a large household or higher taxes. The VA looks at both. The common DTI guideline is 41%, and residual income may allow a higher ratio. If your DTI is above 41%, your residual income must exceed the guideline by 20%. At Lendia, we review both along with your credit and the rest of your file.
What goes into the calculation?
- Loan amount. Two bands apply: $79,999 and under, and $80,000 and up. Most California purchases fall in the second band.
- Household size. Everyone who lives with you counts, regardless of relationship and whether they are on the title. Children who live with you part-time are included.
- Region. For California, the VA uses the West region.
- Military facilities. If you or your spouse is active duty or retired and will keep using military facilities near the home, the requirement is reduced by 5%.
- Non-taxable income. It is not grossed up when calculating residual income.
What is subtracted from gross income?
- Your monthly housing payment and every debt counted in your debt-to-income ratio
- Maintenance and utilities for the home
- Social Security and Medicare taxes: 7.65% of gross pay (15.3% if you are self-employed)
- Federal income taxes
- State income taxes
What are the California (West region) residual income minimums?
Loan amount $79,999 and below
| Family size | Minimum monthly residual income (West) |
|---|---|
| 1 | $425 |
| 2 | $713 |
| 3 | $859 |
| 4 | $967 |
| 5 | $1,004 |
| 6 | $1,079 (add $75 per person over 5) |
| 7 | $1,154 |
Loan amount $80,000 and above
| Family size | Minimum monthly residual income (West) |
|---|---|
| 1 | $491 |
| 2 | $823 |
| 3 | $990 |
| 4 | $1,117 |
| 5 | $1,158 |
| 6 | $1,238 (add $80 per person over 5) |
| 7 | $1,318 |
What does a residual income calculation look like?
Federal income tax: $1,200
State income tax: $450
Social Security and Medicare (7.65% of $11,000): $841.50
Housing payment (principal, interest, taxes, insurance): $4,300
Other debts (car and credit cards): $600
Maintenance and utilities allowance: $350
Total subtracted: $1,200 + $450 + $841.50 + $4,300 + $600 + $350 = $7,741.50
Residual income: $11,000 – $7,741.50 = $3,258.50
Their debt-to-income ratio, counting housing and other debts, is ($4,300 + $600) / $11,000, or about 44.5%. That is above 41%, so residual income must exceed the guideline by 20%. The adjusted requirement is $1,117 x 1.20 = $1,340.40. Their $3,258.50 is well above it, so residual income is a strength in this file. Actual figures and lender guidelines vary.
If the same family qualified for the 5% military facilities reduction, the base guideline would drop from $1,117 to about $1,061. The exact allowances for maintenance and utilities depend on the size of the home, and your lender calculates them.
What if my residual income is short?
Falling short does not always end the loan, because the VA treats the minimum as a guideline weighed with your other credit factors. There are practical ways to improve the numbers:
- Pay off or pay down installment and revolving debts before applying.
- Lower the purchase price or loan amount, or put money down to reduce the housing payment.
- Add qualifying income, such as a co-borrower’s income, where it counts.
- Check which family members really count in your household.
Your entitlement and funding fee can also affect the loan amount. See VA funding fee.
Why does this matter in California?
California loan amounts are large, and taxes and housing costs run high. That makes both your DTI and your residual income worth checking before you shop. Larger loans, such as those near the county limit, also tend to need stronger credit. Related guides: VA loan eligibility, VA loans for home purchase and the VA residual income program page.
At Lendia, we run your numbers early
At Lendia, we run your residual income and DTI before you shop, so you know your budget. A Licensed Lendia California Loan Officer can do it in one short call. Rates and terms depend on your situation; approval requires qualification. Contact us or get a rate quote now.
Frequently Asked Questions
Is residual income the same as debt-to-income?
No. DTI is a ratio of debts to income. Residual income is the dollar amount left over each month after expenses.
Do VA loans have a maximum DTI?
The common guideline is 41%. A higher ratio may be possible when residual income is strong, with residual income at least 20% above the guideline.
Who counts in my family size?
Everyone in the household, whether or not they are related or on the title. Part-time children are included.
Which region applies in California?
The West region.
Does self-employment change residual income?
Yes. Social Security and Medicare taxes are subtracted at 15.3% rather than 7.65%. See VA loans for the self-employed.
Talk to a Licensed Lendia California Loan Officer
At Lendia, we review your situation and show you the programs you qualify for.