What Is VA Residual Income and How Is It Calculated?
By Joe Nelson, Retired Air Force, Nelson Home Group Team Leader and Mortgage Loan Originator
VA residual income is the money you have left every month after the lender subtracts your housing payment, your other debt payments, federal and state income taxes, payroll deductions, dependent care costs, and a maintenance and utilities allowance based on the home’s square footage. For a household of four in the Midwest, which is where both Kansas and Missouri sit, the guideline on loan amounts of $80,000 and above is $1,003 a month. It is a second test that runs alongside the debt to income ratio, and I think it is the smartest rule in mortgage lending.
Watch the full breakdown:
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Why Does VA Run a Residual Income Test on Top of DTI?
Residual income is a dollar test, not a percentage test.
A debt to income ratio is a percentage, and percentages don’t buy groceries. Residual income is a cash flow test: after everything is paid, is there real money left for food, gas, kids, and life? The discipline shows up in how the program performs. In fiscal year 2025, VA reported a 94.96 percent default resolution rate and helped 173,478 borrowers retain homeownership or avoid foreclosure. I think underwriting to a dollar figure instead of only a percentage is part of why VA has that much room to work with a struggling borrower, and I will defend the rule all day.
It is also the mechanism that lets VA approve some files above the 41 percent debt to income benchmark instead of declining them on the ratio alone, a range I walk through in my Kansas City affordability guide.
How Is VA Residual Income Calculated?
VA’s worksheet charges 14 cents a square foot for maintenance and utilities.
Start with gross monthly income. Subtract federal and state income taxes, Social Security and other payroll deductions, the full housing payment including taxes and insurance, your significant monthly debt payments, dependent care costs, and job related expenses like commuting. Then subtract the maintenance and utilities allowance. What is left has to clear the table figure for your region and household size.
That last deduction is not a rule of thumb, and it is the one that surprises people. VA’s own loan analysis job aid tells the underwriter to take the gross living area from the appraisal and multiply it by 14 cents per square foot. A 2,800 square foot house puts $392 a month into that box before a single bill is counted. A bigger house raises the allowance without changing the number you have to clear, which is why the square footage of the specific home is part of your qualification and not just your utility budget.
What Is the VA Residual Income Chart for Kansas and Missouri?
Kansas and Missouri are both in VA’s Midwest region, so a buyer in Overland Park and a buyer in Liberty read the same column. The table has two loan tiers, and it scales with household size.
| Household size | Loans of $79,999 and below | Loans of $80,000 and above |
|---|---|---|
| 1 | $382 | $441 |
| 2 | $641 | $738 |
| 3 | $772 | $889 |
| 4 | $868 | $1,003 |
| 5 | $902 | $1,039 |
| 6 | $977 | $1,119 |
| 7 | $1,052 | $1,199 |
Midwest region figures. Rows six and seven apply the regulation’s add-on of $75 per additional member in the lower tier and $80 in the upper tier, and the table stops adding at a household of seven. Source: 38 CFR 36.4340, verified August 14, 2026.
Two adjustments move those numbers, and both matter around here. First, when a file’s debt to income ratio runs above 41 percent, the loan can still be approved, but it takes a written justification signed by the underwriter’s supervisor. That second level review is waived when residual income beats the guideline by at least 20 percent, which is about $1,204 for that household of four. Second, for an active duty servicemember or a military retiree, the regulation reduces the guideline by a minimum of 5 percent when there is a clear indication the borrower or spouse will keep getting the benefit of a nearby military base. If you are buying at Fort Leavenworth or Whiteman, ask your lender whether that reduction applies to your file.
One more detail worth knowing: a spouse who is not going on the note and who has stable, verified employment can be left out of the household count when the lender tests residual income. That single decision can move the target by more than a hundred dollars a month.
What Does VA Residual Income Mean for Your House Hunt?
The Midwest guideline for a household of four on loans of $80,000 and above.
Residual income is why two buyers with identical incomes and identical payments can get different answers on the same house. Household size, debts, and the square footage of the home itself all move it. It is also why paying down a car loan can matter more than people expect, since every required payment comes straight out of what is left over. I ran that math in my breakdown of what a truck payment costs you in mortgage.
One boundary to keep straight: tax free disability compensation can be grossed up at 125 percent for the debt to income ratio, but residual income uses your actual dollars. Both tests still have to pass on their own. At Nelson Home Group we run the residual number before a client writes an offer, because the taxes, insurance, and square footage of one specific house can change the answer after you are already under contract. The income targets underneath all of it are in my breakdown of the income it takes to buy a $400,000 Kansas City house.
If you want to know where your file lands before a lender tells you, call me and we will run it in one conversation.
Frequently Asked Questions
What is the VA residual income requirement for a family of four in the Midwest?
On loan amounts of $80,000 and above, the Midwest guideline for a household of four is $1,003 a month left over after income taxes, payroll deductions, the housing payment, debts, dependent care, and the maintenance and utilities allowance. Kansas and Missouri are both in the Midwest region. The figure drops to $868 on loan amounts of $79,999 and below.
Does the size of the house affect VA residual income?
Yes. VA’s loan analysis job aid tells the underwriter to multiply the home’s gross living area by 14 cents per square foot for maintenance and utilities. A 2,800 square foot house puts $392 a month into that line, so a larger home lowers your calculated residual income even when the mortgage payment is identical.
What happens if my residual income is too low?
It is not an automatic denial, but it is a problem the file has to answer. The lender looks at the full credit picture and any compensating factors. Paying down a significant monthly debt, adjusting the price point, or looking at a smaller home all move the number. Above 41 percent debt to income, clearing the guideline by 20 percent is what removes the supervisor review requirement.
Is residual income the same as debt to income ratio?
No. Debt to income is a percentage of gross income. Residual income is a dollar amount left after the required deductions. VA looks at both, and both have to hold up on their own.
Are dependent care costs deducted from VA residual income?
Yes. VA’s underwriting standards count costs for dependent care, along with job related expenses like commuting, against the balance available for family support. They come out alongside taxes, payroll deductions, debts, and the housing payment.
Is the VA residual income requirement the same in Kansas and Missouri?
Yes. Both states sit in VA’s Midwest region, so buyers on either side of the state line use the same column of the table. Loan amount and household size are what change the number, not which side of State Line Road you buy on.
Ready to Talk?
I make this content because I actually want to work with you. If you are running this math on your own situation, don’t guess. Call me or shoot me an email and we will run your real numbers in one conversation.
Call: (816) 680-6624
Email: [email protected]
Web: https://nelsonhomegroupkc.com/
Joe Nelson is a licensed Realtor and mortgage loan originator serving the Kansas City metro. This article is for educational purposes and is not a loan commitment, a rate quote, or tax advice. Residual income figures are VA underwriting guidelines, not approval guarantees, and your file will be evaluated as a whole. Equal Housing Opportunity.