I’ve helped many veterans secure homes in the Greater Boston area thanks to the extraordinary VA Loan. The mortgage, guaranteed from the US Dept. of Veterans Affairs, carries a wealth of exclusive benefits.
One of the most attractive benefits is the option for no down payments. Despite this apparent risk, VA mortgages rarely default. Why? Because the VA follows a principle that all borrowers can learn from: residual income.
Simply put, residual income is your monthly income minus all of your credit obligations, including the mortgage itself along with monthly bills from student loans, credit card debts, and any other payments.
Why is knowing your residual income useful? It gives you an accurate picture of how much money you’ll have to save, invest, and spend every month.
Using Residual Income Intelligently
If a household’s residual income is too low, the VA won’t approve the loan. But it’s also a useful metric for every homebuyer to know if they’re really ready to commit to the mortgage they’re considering.
Too many first-time buyers are surprised by how thin their wallets feel once the mortgage bills start rolling in. Calculate your residual income ahead of time to manage expectations and spend smartly.
Residual Income Requirements for VA Loans in 2014
Fortunately, the VA doesn’t hide their residual income requirements. This means all borrowers can use them as a benchmark to measure their own income. For the Northeast region, including Greater Boston and all of Massachusetts, the VA’s monthly residual income requirements for a loan of at least $80,000 are as follows: $450 for a family of 1; $755 for a family of 2; $909 for a family of 3; $1,025 for 4; $1,062 for 5; $1,142 for 6; and $1,222 for 7.
Remember that these are intended for VA loans, so while they’re useful for other borrowers, you should really talk to an experience loan officer to calculate your residual income and understand how much you’ll need to meet your financial goals.
If you have any questions or comments, feel free to reach out me to me.