Veteran’s have one of the best mortgage programs available, with their VA Loan benefits. The approval process, and underwriting guidelines for a VA Loan in NC have some “unique” requirements that we don’t find with other mortgage loans. VA Loans actually have two different thresholds for loan approval. Where we find a difference, is in the requirement to consider “residual income.” VA Loan residual income requirements in NC vary based upon the size of your family – and qualifying for a VA Loan in North Carolina requires that we consider monthly energy costs and child care expenses.
Because VA loans are backed by the US Government, we offer VA Loans at some of the lowest mortgage interest rates available! Some of the reasons VA Loans are so popular in North Carolina are because:
- There’s no down payment required up to a purchase of $424,100. For homes priced higher than that, the down payment is a fraction of what it would be with a Conventional Loan.
- You don’t have to be a First Time Home Buyer to use the VA Loan. If you’ve used your eligibility in the past, you may still qualify for a VA Loan!
- The PMI Costs on a VA Loan are MUCH MUCH lower than they are for other mortgage programs, making it possible to buy a larger home, and keep your mortgage payments very affordable.
Qualifying for a VA Loan: Child Care Expenses
In Underwriting a VA Loan, we are required to look at the Veteran’s income, their debts and their credit – just like with other mortgage programs. For this “standard” mortgage underwriting of a VA Loan, we are looking for only one ratio of 41%. This means that your total monthly payments, when considered with the gross monthly income from the Borrowers, can not exceed 41%.
It’s important to remember that on a VA Loan, we must also include CHILD CARE expenses… which is something we do NOT have to consider with other Government backed programs, including FHA and USDA Home Loans. This can also make it difficult to qualify, because it is impacting your monthly VA Loan Residual Income Requirements.
VA Loan Underwriters require us to obtain a written child care expense statement at the time of application. This is a document that outlines whether you have any daycare or after school expenses on a monthly basis. If you state that you do not incur any childcare expenses for your children who are under the age of 12, then you’ll have to explain why. Bottom line? Your monthly child care debt is included in the 41% ratio, when qualifying for a VA Home Loan.
If you are wondering if your income is going to qualify you for a house, once you include child care expenses – talk to us about your income sources! In many cases, income requirements for a VA Mortgage Loan varies depending on whether the Veteran is currently working as a Civilian, Retired from the Service, or Active Military.
As a VA Lender, we are required to verify both employment status and the nature of the income earned by that job. The Veteran’s Administration says that “Income analysis is not an exact science. It requires the lender to underwrite each loan on a case-by-case basis, using judgment, common sense, and flexibility, when warranted.”
VA Loan Residual Income Requirements in NC
Residual income is the monthly Household Income left over at the end of the month, after all of your other bills have been paid. This is an important piece of information. If the spouse is NOT on the loan, however they have income we can verify – we CAN use that income when we are considering VA Loan Residual Income Requirements in NC.
In addition, the VA Loan underwriting system includes a mandatory “Maintenance and Utility” cost – which is amount set by the VA for the geographic area you are buying a home in. This is also a charge that we do no have to calculate for other mortgage programs. To calculate the Maintenance and Utility cost for the home you are interested in, multiply the square footage by 14 cents. This means if the house is 2000 square feet, the monthly amount we are going to use in qualifying you (meaning we are adding another debt of this amount) is $280.
The Department of Veterans Affairs requires us to underwrite the VA Loan based upon a minimum residual income limit that varies by individual family size and the cost of living by geography. This means that the numbers we work with in NC are different (by quite a bit) from those in Alaska (for instance).
South Region VA Residual Income Tables
For Alabama, Arkansas, Delaware, District of Columbia, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, Puerto Rico, South Carolina, Tennessee, Texas, Virginia, and West Virginia, the 2017 VA residual income tables are as follows:
- Family size of 1 : $441
- Family size of 2 : $738
- Family size of 3 : $889
- Family size of 4 : $1,003
- Family size of 5 : $1,039
- For each additional family member, add $80 up to a family of 7
The VA wants to make certain that you have enough money left over to take care of your day-to-day expenses. So, they use the following formula to determine your VA Loan Residual Income.
Calculating Your VA Loan Residual Income
The VA residual income can only be calculated accurately by your lender’s underwriter. However, you can get a general idea of your residual income level using the same process as shown in the above example.
| Your monthly gross income | |
| Spouse’s monthly gross income | + |
| Subtract state and federal taxes/Social Sec Taxes* |
– |
| Net | = |
| Subtract credit card, auto loan, & student loan payments |
– |
| Subtract estimated maintenance utilities (14 cents per square foot based on home you wish to buy) | – |
| Subtract childcare expenses/child support | – |
| Subtract future mortgage payment, property taxes, homeowners insurance, and HOA dues** | – |
| Estimated VA Residual Income | = |
*The VA loan underwriter looks at an IRS publication for an estimate of your income taxes, they are not always taking the number off of your pay stubs. The underwriter’s calculation may be different from your pay-stubs. **Contact Us for an accurate future housing payment. Keep in mind that this method only gives you an estimate, and your VA underwriter’s determination of your residual income may be quite different. This is just meant to give you your general standing when it comes to residual income.
Residual income for a VA Home Loan is sometimes confused with a “standard” debt-to-income ratio. We still look at the “standard” ratio between your monthly GROSS income versus your monthly debt, including your house payment. Your debt-to-income ratio is used to determine VA loan eligibility. This ratio needs to at the 41% mark – however, we’ve seen slightly higher ratios approved.
Here’s the good news – if you are over the 41% DTI guidelines, and you meet the Residual Income Guidelines – you can still be approved for a VA Home Loan.
For applicants whose residual income exceeds the VA loan minimum residual income guidelines by 20% or more, debt-to-income ratios can be a non-factor. This can be a HUGE benefit for those who have Student Loan Debt that is in Deferment.
What if you talked to a lender that said you don’t meet the VA Loan Residual Income Requirements? Every Underwriter and every mortgage company has a little different way of figuring out income, and debt.
If you’ve been rejected by one lender, and you think your residual income level is close to the VA Loan Residual Income Requirements in NC, allow us to take another look at your scenario. There’s a chance we can present the numbers a little differently – you could be approved even if you’ve been turned down before.
Because all mortgage loans that are backed by the Government have the “best” interest rates right now, this is a GREAT program to use! In addition, there’s no monthly PMI! Even if you are purchasing a “Bigger” home, and you are going to make a down-payment, you might still want to use this program! If you are considering a purchase, and want to know more about VA Loan Residual Income Requirements, please call Steve and Eleanor Thorne, Government Mortgage Loan Experts, 919-649-5058
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