To secure VA loan approval, veterans must demonstrate sufficient residual income, meaning money left after essential expenses. This ensures financial stability post-mortgage. Improve residual income by reducing debts, optimizing mortgage calculations, and increasing verifiable income. Meeting VA residual income requirements involves understanding regional thresholds and adjusting finances accordingly.
What’s Residual Income And Why Does It Matter So Damn Much?
Residual income is what’s left in your wallet every month after all your major expenses are paid—mortgage, car loans, student loans, credit cards, utilities, child support… you name it. This is VA’s way of double-checking that you’ve got enough cash flow to keep life going after the house note hits. They don’t care about your gross income or even your net income as much as this tangible leftover.
Here’s the truth: It’s not just whether you can pay the mortgage—it’s whether that mortgage won’t crush your lifestyle afterwards.
Here’s the VA expectation by region and family size:
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 |
Now, what if your residual income is short? That’s where you’ve got work to do.
How to Improve Your Residual Income for VA Loan Approval
This isn’t about hustle culture or motivational speeches. Let’s keep it tactical.
You’ve got two levers to pull:
- Increase income
- Cut monthly debt expenses
1. Start with Your Debts — Fastest Wins First
If you’re sitting on any monthly payments, even low balances, they’re hurting your residual income.
Example: You might have a car loan that’s $400/mo. That’s $400 that VA includes in your expenses—which means $400 less in residual income.
Here’s how to free up more space immediately:
- Pay off small loans quickly – If your credit card is under $1,000 and costing over $50/month, kill it fast.
- Refinance higher payments into manageable ones – Stretch out the term, free up monthly cash.
- Don’t co-sign for anyone – Their loan = your liability in VA’s eyes.
- Dispute errors on your credit report – Some collections or open balances reporting wrong can tank you for no reason.
Every monthly payment you eliminate adds that amount into your residual income.
If you can free up $300-500, you could cross the line into eligibility.
2. Tweak the Mortgage Calculation
This is a sneak move that works, especially when you’re working with your lender and real estate team.
Lowering your proposed payment = more monthly leftover.
Here’s how:
- Buy a cheaper property – Even $20K less could save $150/mo.
- Shop insurance – Lower property insurance premiums can reduce PITIA.
- Lower taxes – Move to a lower tax county if you’re on border zones.
- Negotiate seller credits – They can cover closing costs, preserving your reserves.
Your lender can plug these numbers in real time to show the difference in your residual income snapshot.
3. Increase Your Verified Income (Key Word: Verified)
Side hustles are cool—but do they show up on paper?
VA only counts stable, documented income that you can prove you’ve been earning consistently.
This includes:
- Full-time W2 job
- Active-duty pay
- Retirement or service-connected disability income
- Self-employment (with 2+ years of tax returns)
- Part-time work (if it’s been 2 years straight)
If you’ve recently started gig or contract work, you may not be able to count it—yet.
That said, here’s what you can do today:
- Ask for more hours or overtime – It improves your last 12 months of earnings fast.
- Pick up a part-time job (and stick with it) – Keep records from day one.
- Document all income with pay stubs + bank deposits
I had a client, Marine Corps veteran, who picked up weekend security gigs. In 4 months, that extra $500/month put him over the threshold.
4. Cut Utility Costs + Monthly Obligations
Here’s the thing—while not all utilities are calculated in DTI, some load-bearing ones matter in residual calculations.
You don’t need to go full minimalist, just trim down stuff that doesn’t reflect active necessity.
- Ditch unused subscriptions (Hulu, Disney+, gym you haven’t touched in 6 months).
- Bundle utilities to lower combined or fixed rates.
- Install efficient lighting + thermostats to slash electric usage (yep, seriously).
Saving $100/mo here? That’s massive for borderline approval cases.
Why Most Veterans Miss This Part Entirely
Everyone focuses on credit score. They track every number like it’s the stock market.
But even with a 740 credit score, you can get rejected if residual income is weak.
That’s why I hammer this. Because I’ve seen strong income, low credit usage, and great service records—all rejected because of this one piece.
FAQs About Residual Income for VA Loans
1. What is residual income, and why is it important for VA loan approval?
Residual income is the money left over after paying all major expenses like mortgage, car loans, credit cards, and utilities. The VA uses it to ensure veterans can afford daily living costs after paying their mortgage.
2. How much residual income do I need to qualify for a VA loan?
The required residual income depends on your family size and region. For example, a single person in the Northeast needs $450, while a family of four in the West requires $1,117.
3. What happens if my residual income is too low?
If your residual income is below the VA’s threshold, you may need to increase your income, reduce monthly expenses, or adjust your home purchase strategy.
4. Can side gigs or contract work count toward my income?
Only if they are documented and stable. You typically need two years of tax records to count self-employment or gig work.
5. Why do some veterans get rejected for VA loans despite good credit scores?
Even with a high credit score, if your residual income is below VA’s minimum requirement, you may be denied a loan. Residual income is a crucial factor that many overlook.