Borrower’s are expected to have a stable, reliable income to cover any existing debt as well as their new mortgage payment when starting the VA loan process, in other words, residual income. Residual income is meant to cover typical family needs such as food, transportation and housing income. This extra income ensures borrowers have extra funds in the case of an emergency as well as the ability to meet all financial obligations. The VA loan process will examine the minimum amount of residual income required depending on their loan amount amount, property location and family size. Larger families in the Northeast and West typically need more residual income than similar families living in the Midwest and South, these requirements are set by the Department of Veteran Affairs. Residual income is used with a qualified borrower’s debt-to-income ratio (DTI) to determine your maximum loan eligibility amount. The lower your DTI the better, as it shows that there is a balance between how much you make and how much debt is incurred. As standard policy, the acceptable DTI for a VA loan is 41%, but can be as high as 71% depending on compensating factors.