VA residual income guidelines require borrowers to have a minimum amount of discretionary income left over each month after paying major expenses. The VA allows lenders to 'gross-up' tax-free income to create a pre-tax figure to calculate the DTI ratio. Lenders will add up these debts and divide them by your gross (pre-tax) monthly income. On VA loans, lenders will also include an estimated cost for monthly utility bills, multiplying the home's square footage by 0.14. The biggest debt is likely to be your projected monthly mortgage payment, which will include the principal and interest on the loan along with estimated escrow amounts for property taxes and homeowners insurance.

Guidelines and policies can vary by lender. If you have collections or charge-offs on your credit report, lenders won't typically factor those into your DTI ratio calculation unless you're making regular monthly payments on those debts.īut lenders may have a cap on how much of this derogatory credit you can have. But lenders can also consider obligations that don't make your credit report, like child-care costs, alimony and even commuting expenses. These are expenses like mortgages, car loans, student loans, credit card debt and more. Lenders will consider your major revolving and installment debts, mostly pulled directly from your credit reports.

Only certain types of debts and income count toward your DTI ratio. But the VA doesn't make home loans, and mortgage lenders will often have in-house caps on DTI ratio that can vary depending on the borrower's credit, finances and more. The VA views the DTI ratio as a guide to help lenders, and it doesn't set a maximum ratio that borrowers must stay under.

Va mortgage affordability calculator