Are you a veteran or an active-duty service member looking for a way to finance a home purchase? If so, you may be eligible for a VA loan. However, before you can take advantage of this financing option, you must meet certain criteria, including a residual income requirement.
This article will provide an in-depth explanation of the VA loan residual income chart, including how it works and what it means for your eligibility. By the end of this article, you’ll have a clear understanding of whether you qualify for a VA loan and what steps you can take if you don’t.
Introduction
When it comes to obtaining a VA home loan, the residual income requirement is an essential factor to consider. VA lenders require prospective borrowers to meet a specific income threshold to ensure their ability to afford a mortgage payment and maintain a reasonable standard of living.
As such, the VA has established a residual income chart that outlines the minimum income requirements for veterans and active-duty service members. Let’s take a closer look at how this chart works and what it means for your eligibility.
What is the VA Loan Residual Income Chart?
The VA loan residual income chart is a tool used by lenders to assess a borrower’s ability to repay a mortgage. The chart outlines the minimum income requirements for veterans and active-duty service members based on their location, family size, and monthly expenses.
The residual income calculation takes into account all sources of income, including military pay, civilian income, and income from investments. After deducting allowable expenses such as taxes, insurance, and debts, the remaining income is compared to the applicable threshold on the residual income chart.
Family Size |
Northeast |
Midwest |
South |
West |
|---|---|---|---|---|
1 |
$450 |
$441 |
$441 |
$491 |
2 |
$755 |
$738 |
$738 |
$823 |
3 |
$909 |
$889 |
$889 |
$990 |
4 |
$1,025 |
$1,004 |
$1,004 |
$1,117 |
5+ |
$1,134 |
$1,109 |
$1,109 |
$1,234 |
How Does the VA Loan Residual Income Chart Benefit Borrowers?
The residual income calculation serves to protect borrowers from taking on a mortgage that they cannot afford to repay. By using the chart, lenders can assess a borrower’s ability to manage their finances effectively and maintain a suitable standard of living.
Additionally, the VA loan residual income chart helps borrowers to determine the maximum loan amount they’re eligible for based on their income and expenses. This information allows borrowers to make informed decisions about their home purchase and avoid overextending themselves financially.
What if My Residual Income is Below the Minimum Threshold?
If your residual income does not meet the minimum requirements outlined on the VA loan residual income chart, you may still be eligible for a VA loan. However, you’ll need to apply for a waiver, which is a discretionary process that considers various factors such as your credit score, assets, and employment history.
While a waiver is not guaranteed, it’s worth exploring this option if you believe you can demonstrate your ability to repay a mortgage through other means.
FAQs
Can I Use My VA Loan for an Investment Property?
No, VA loans are intended for primary residences only. You cannot use a VA loan to finance an investment property or vacation home.
Can I Use a Co-Signer to Qualify for a VA Loan?
Yes, VA loans allow co-signers to help you meet the income and credit requirements. However, the co-signer must be a spouse or another veteran or active-duty service member.
Can I Get a VA Loan if I Have Filed for Bankruptcy?
Yes, you can still be eligible for a VA loan if you’ve filed for bankruptcy. However, you may need to wait a certain amount of time after the bankruptcy is discharged before you can apply, depending on the type of bankruptcy you filed.
Can I Refinance My VA Loan?
Yes, VA loans are eligible for refinancing, which can help you obtain a better interest rate, lower your monthly payments, or change the terms of your loan. However, there may be fees associated with refinancing, so be sure to consider these costs before proceeding.
What Credit Score Do I Need to Qualify for a VA Loan?
While there is no minimum credit score requirement for VA loans, most lenders prefer to work with borrowers who have a credit score of at least 620. However, lenders may be willing to work with borrowers who have lower credit scores if they can demonstrate good financial habits and a willingness to repay the loan.
How Much Does a VA Loan Cost?
VA loans have several costs associated with them, including an upfront funding fee, which is a percentage of the loan amount, and closing costs, which cover expenses such as appraisal fees, title insurance, and attorney fees. Your lender can provide you with a detailed breakdown of these costs.
Can I Use a VA Loan to Build a Home?
Yes, VA loans can be used to finance the construction of a new home. However, there are additional requirements that must be met, such as working with an approved builder and obtaining all necessary permits and inspections.
How Do I Apply for a VA Loan?
To apply for a VA loan, you’ll need to provide proof of your military service or eligibility, such as a Certificate of Eligibility (COE). You’ll also need to work with an approved VA lender who can guide you through the application process and help you obtain financing.
How Long Does it Take to Get Approved for a VA Loan?
The timeline for getting approved for a VA loan can vary depending on a variety of factors, such as the complexity of your application, the lender’s workload, and any issues that arise during the underwriting process. However, most borrowers can expect the process to take several weeks or even months from start to finish.
What Happens if I Can’t Make My VA Loan Payments?
If you’re struggling to make your VA loan payments, you should contact your lender as soon as possible to discuss your options. Depending on your circumstances, your lender may be able to help you modify your loan, refinance your loan, or explore other repayment options.
Can I Use a VA Loan to Buy a Condo?
Yes, VA loans can be used to purchase a condo, as long as the condo is approved by the VA. Your lender can provide you with a list of approved condos in your area.
What Happens if I Default on My VA Loan?
If you default on your VA loan, the lender may initiate foreclosure proceedings to take possession of your home. Additionally, your credit score will be negatively impacted, and you may have difficulty obtaining financing in the future.
How Much of a Down Payment Do I Need for a VA Loan?
VA loans do not require a down payment, but borrowers may choose to make a down payment to reduce their monthly mortgage payments or to build equity in their home more quickly.
Conclusion
If you’re a veteran or an active-duty service member, a VA loan can be an excellent way to finance your home purchase. However, it’s essential to understand the residual income requirement and how it may affect your eligibility.
By using the VA loan residual income chart and working with an approved VA lender, you can determine whether you qualify for a VA loan and take the necessary steps to secure financing for the home of your dreams.
Ready to Apply for a VA Loan?
If you’re ready to take the next step in your home buying journey, contact an approved VA lender today. They can help you navigate the application process, answer any questions you may have, and provide you with the guidance you need to obtain financing for your home purchase.
Disclaimer
This article is intended for informational purposes only and should not be construed as legal or financial advice. Please consult with a qualified professional before making any financial decisions.