What is a good debt-to-income ratio for a VA loan?

Abstract

What is DTI? DTI stands for debt-to-income ratio - a calculation of your monthly debts compared to your monthly income. Typically, a VA lender can allow for a higher DTI ratio if you have enough residual income or your DTI is high due to tax-free income. How DTI ratios are calculated for a VA loan Since VA lenders use your back-end debt-to-income ratio, the first step to calculating your DTI is to add up all your monthly debt payments. DTI ratio & residual income All VA loans require a certain amount of residual income - or discretionary income that's left over after covering your monthly debts and mortgage payment. What if you have a high DTI ratio? If your DTI is higher than 41%, the above residual income rule may be able to help you. What is the required residual income calculation when DTI exceeds 41% for a VA loan? All VA loans require residual income, which is the income left over after you've met all your monthly debt obligations. So if you were initially required to have $1,000 in residual income, but your DTI comes out to 45%, you'd need to have $1,200 in residual income instead. Only then could you qualify for the loan.