Category: Income Guidelines

Calculating VA Residual Income in Kentucky

Calculating Residual Income For a Kentucky VA home loan approval


Calculating Residual Income:

Louisville Kentucky Mortgage Lender for FHA, VA, KHC, USDA and Rural Housing Kentucky Mortgages: Louisville Kentucky VA Income Guidelines


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How to Calculate Residual Income for a Kentucky VA Home Loan Approval (2026)

Kentucky veterans using a VA home loan must meet minimum residual-income requirements. Residual income measures the monthly funds left over after housing costs, taxes, and all recurring bills. It is a core underwriting factor that determines whether a VA loan can be approved, especially when debt-to-income ratios are higher or credit depth is limited.

This guide breaks down how residual income works, how to calculate it correctly, and the 2026 minimums required for Kentucky VA buyers.

What Is Residual Income?

Residual income is the amount of money left after subtracting all monthly obligations from the borrower’s gross monthly income. The VA establishes region-based minimums to ensure borrowers have enough remaining funds to cover essentials such as food, transportation, clothing, utilities, and other living expenses.

Even if a borrower has a high credit score and a strong DTI ratio, the loan cannot be approved without meeting minimum residual-income thresholds.

How Kentucky Lenders Calculate VA Residual Income

  1. Start with gross monthly income for all occupying borrowers.
  2. Subtract federal, state, and local taxes based on paystubs/W-2 withholding tables.
  3. Subtract the proposed housing payment (PITI): principal, interest, taxes, insurance, HOA, and any maintenance fees.
  4. Subtract all recurring debts:
    • auto loans
    • student loans
    • credit card minimums
    • child support / alimony
    • personal loans or installment debt
  5. Subtract estimated utilities/maintenance. Many lenders use approximately $0.14 per square foot of heated living space.

The figure remaining after all these deductions is the official VA residual income.

2026 VA Residual Income Requirements for Kentucky (South/Midwest Region)

Household Size Minimum Residual Income
1 Person $441
2 Persons $738
3 Persons $889
4 Persons $1,003
5 Persons $1,039
Each Additional Person Add $80

If debt-to-income ratio exceeds 41 percent, underwriters typically require 20 percent more than the baseline residual number.

Why Residual Income Matters More Than DTI

Residual income is one of the strongest predictors of loan performance in the VA program. Borrowers who meet or exceed the residual-income benchmark show significantly higher repayment success rates — even when credit scores are less than perfect or DTI ratios appear high.

If the loan does not meet residual income, the file cannot be approved without compensating factors or structural changes to qualifying income or household composition.

Free Help Calculating Residual Income

If you want, I can run a complete residual-income analysis for you or your buyer using up-to-date 2026 VA guidelines.

Joel Lobb, Senior Loan Officer • NMLS 57916
EVO Mortgage (Company NMLS 1738461)
10602 Timberwood Cir, Suite 3, Louisville KY 40223

Kentucky VA Mortgage Guidelines For Income and Job History

Kentucky Mortgage VA Guidelines for Income.

Generally, Overtime, Part-Time, Second Jobs, and Bonuses cannot be considered stable and reliable unless it has continued and been verified for 2 years.
However, Kentucky VA guideline


Kentucky Mortgage VA Guidelines for Income.

Generally, Overtime, Part-Time, Second Jobs, and Bonuses cannot be considered stable and reliable unless it has continued and been verified for 2 years.
However, Kentucky VA guidelines allow the lender to offset debt of 6-24 months in duration with this income.

Reference: VA Handbook – Chapter 4 – Section 2(h)
“The lender may use this income, if not eligible for inclusion in income, but verified for at least 12 months, to offset debts of 6 to 24 months duration. An explanation of why the income was used to offset must be documented.”

This little-known secret in the guidelines could help your borrower qualify by reducing the debt included in their qualifying ratio!

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Have Questions or Need Expert Advice? Text, email, or call me below:

Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916

American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364

Text/call: 502-905-3708
fax: 502-327-9119
email: kentuckyloan@gmail.com

http://www.mylouisvillekentuckymortgage.com/

Kentucky VA Home Loans for 2021


 

Kentucky VA Home Loans for 2021

 

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  •  No down payment in most cases for purchase loans (up-front money toward your home purchase), and easier borrower credit requirements.
  •  No monthly mortgage insurance premiums or private mortgage insurance (PMI).
  •  Lower homebuyer closing costs, and limits to what borrowers can be charged.
  •  The opportunity to roll your “VA funding fee” into your mortgage.
  • The ability to refinance a non-VA loan into the VA mortgage program.
  •  The opportunity to: ask a home seller to contribute up to 4 percent of the mortgage amount to cover some of the closing costs; ask your lender to cover some of the closing costs; seek closing cost assistance through state homebuying programs created for veterans and first-time buyers.
  • The right to become a VA borrower for life. In most cases you can use VA mortgage programs forever, and sometimes you can have more than one VA loan.
  •  Eligibility of financing for spouses of service-members who died in the line of duty or from a service-related disability.

You can review all types of Kentucky VA Home Loans here, including purchase mortgages, refinance mortgages (called Interest Rate Reduction Refinance Loans or IRRRLs), and cash-out refinance loans.

To qualify for a Kentucky VA Home Loan, usually a military veteran or service-member must have 90 consecutive days of active service during wartime, or 181 straight days of service during peacetime, or six years in the national guard or reserves of a particular military branch. You can find out if you’re eligible here.

Kentucky  VA mortgage comes with an additional closing cost called a “VA funding fee” of between 1.4 to 3.6 percent on the amount borrowed (depending on your circumstance). This special fee that non-VA borrowers never have to pay helps partially fund the “government backed” part of the VA borrower program, and many VA borrowers can roll it into their mortgage.

 

VA Loan Quick Facts

0% Down
Minimum Down Payment
620 Credit
Minimum Credit Score
41% DTI
Max Debt-to-Income Ratio
 
 

What is a VA Loan?

VA Loans are designed to assist veterans purchase a home. Active duty military and veterans across the nation will enjoy the desirable loan terms and low interest rates that often come with a VA loan. Additional benefits like no down payment requirement help make home buying an affordable and cost-effective reality for those who have served and continue to serve our country.

What are the benefits of a VA Loan?

VA Loan benefits and features:

  • Zero down payment
  • Buyers may finance the funding fee into the loan
  • Closing costs may be covered
  • Buyers may use gifts and seller contributions to cover closing costs

Who may benefit from a VA Loan?

A VA Loan may the right fit for you if:

  • You’re an eligible veteran or active-duty military
  • You’re buying a first home or are a repeat homebuyer

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