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DTI (Debt to Income ratio) is the ratio of your total monthly debt payments to your gross monthly income.
VA-approved lenders use 41 percent as a top benchmark, but you need to find a balance that feels right for your needs and goals.
To calculate how much home you can afford with a VA loan, VA lenders will assess your debt-to-income ratio, which looks at the relationship between your gross monthly income and your major monthly debts. DTI ratio works differently in VA lending than with other mortgage types.
There isn’t a hard cap on DTI ratio for VA loans. Benchmarks can vary by lender and the borrower’s specific circumstances. Buyers whose DTI ratio exceeds 41 percent will encounter additional financial scrutiny, but that’s by no means a strict cutoff.
Our calculator uses the information you provide about your income and expenses to assess your debt-to-income ratio (DTI). Lenders will typically pull most of your debt information from credit reports. They’re looking at your big recurring payments, and not expenses like groceries, gas or other household or lifestyle needs.
As shown in the calculator, key factors affecting VA home affordability are:
Lenders can count VA disability income and certain military allowances when calculating your purchasing power. Active duty service members receiving Basic Allowance for Housing (BAH) can use this income to pay for part or even all of their monthly mortgage payment.
Other types of military allowances that can count as effective income include flight pay, hazard pay, imminent danger pay and more.
Lenders can also count National Guard and Reserve income.
VA loans come with a guideline that considers your monthly discretionary income. Known as “residual income,” this standard looks at your remaining gross monthly income after you pay your major monthly debts, including the new mortgage payment.
Residual income guidelines vary based on geography and family size. They help ensure VA buyers have sufficient income to weather life’s unexpected challenges, and they’re a major reason VA loans have been the safest mortgage product on the market for most of the last decade.
Interest rates have a direct impact on VA loan affordability. Mortgage rates reflect the cost of borrowing money, and they can vary depending on the lender, the borrower’s credit profile and more.
VA borrowers benefit from having the industry’s lowest average interest rates.
One of the biggest benefits of VA loans is that they don’t require mortgage insurance. That helps veterans and service members stretch their budgets and maximize affordability. Other government loan options carry both upfront and an annual forms of mortgage insurance.
Conventional buyers often need to pay for private mortgage insurance unless they can make a 20 percent down payment.