I have successfully originated over 200 VA Home loans in Kentucky. Put my experience to work for you. Call or text me today at 502-905-3708 or email me at Kentuckyloan@gmail.com-This website is not affiliated with the VA or any other government agency. NMLS #57916 Equal Housing Lender. Same Day Approvals, Fast Closings, and a Local Veteran offering VA Home Loans in Kentucky. Free Credit Report and Pre-Approvals NMLS# 57916 Joel Lobb Loan Originator, Company NMLS ID 1738461 . Equal Housing Lender
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.
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
Start with gross monthly income for all occupying borrowers.
Subtract federal, state, and local taxes based on paystubs/W-2 withholding tables.
Subtract the proposed housing payment (PITI): principal, interest, taxes, insurance, HOA, and any maintenance fees.
Subtract all recurring debts:
auto loans
student loans
credit card minimums
child support / alimony
personal loans or installment debt
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.
Can You Buy a Farm in Kentucky With a VA Home Loan?
Yes, in many cases. The VA Home Loan benefit can be used to purchase a farm property in Kentucky when there is a residence on the land and the Veteran will live in that home as a primary residence.
VA loans are for residential purposes and cannot be used to buy a business.
The Veteran must occupy the home as their primary residence.
The loan must be primarily for a residence, not for purchasing a business or commercial operation.
Properties that are primarily commercial farms (business-first) may not qualify.
Practical Kentucky example: A home on acreage in areas like Oldham County, Shelby County, Spencer County, Hardin County, or rural Warren County can be workable when comps support residential use and the home is the primary purpose of the purchase.
Appraisal, acreage, and outbuildings in Kentucky
VA does not set a maximum number of acres.
Acreage typically isn’t an issue if comparable sales in the area sold primarily for residential use.
Outbuildings and improvements like barns, sheds, corrals, stables, and pastures may be considered in value as residential-related improvements.
The VA valuation must not include livestock, crops, or farm equipment/supplies.
This is why “comps” matter in Kentucky: if the closest comparable sales are residential-with-acreage (not commercial ag sales), underwriting is usually more straightforward. :contentReference[oaicite:1]{index=1}
Using farm income to qualify
If some or all of the income needed to qualify comes from farming operations, the VA requires verification that the Veteran has the ability and experience to operate the farm. :contentReference[oaicite:2]{index=2}
Expect documentation similar to self-employment (history, consistency, and ability to continue).
We’ll focus on stable, documentable qualifying income—not one-time or speculative income.
VA vs FHA vs USDA acreage comparisons (Kentucky)
The real-world issue usually isn’t a hard acreage cap. It’s whether the property is primarily residential, whether comps support the value, and whether there are income-producing features that make the property look like a business purchase.
Program
Does it have a strict acreage limit?
What underwriters/appraisers care about
Common Kentucky “deal killers”
VA
No stated acre limit.
Primary residence requirement, residential comps, no value for livestock/crops/equipment; residential-only valuation for farmland portion.
Property is primarily a working commercial farm; comps are commercial ag sales; value tied to business assets. :contentReference[oaicite:3]{index=3}
FHA
No universal acre cap; must be typical for the area and primarily residential.
Residential highest-and-best use, marketability, and appraisal support; avoid properties that function like a commercial operation.
Commercial ag use dominates; unique specialty improvements without residential market support.
USDA (Guaranteed)
No specific site size/acreage limit, but it must be predominantly residential.
Predominantly residential character; the property must not include buildings principally used for income-producing purposes.
Income-producing land or facilities used primarily for ag/commercial enterprise; property fails rural eligibility mapping. :contentReference[oaicite:4]{index=4}
Quick Kentucky rule of thumb
Residential-firstComps must fitNo business purchaseDocumentable incomeClear occupancy plan
Steps to a VA home loan (including farm properties)
Get your Certificate of Eligibility (COE). Lenders can typically retrieve this electronically.
Get preapproved with a VA-experienced lender and connect with a Realtor.
Choose a home and sign a purchase agreement that includes a VA financing contingency.
Order the VA appraisal and clear final underwriting conditions for closing.
If you’re looking at acreage properties in Kentucky, send the listing early. The earlier we evaluate comps and “residential vs business” risk, the fewer surprises you’ll have later.
FAQ: Kentucky VA farm properties
Can a VA loan be used on a property with barns and stables?
Often, yes, if the property is primarily residential and the improvements contribute to residential market value. The VA valuation cannot include livestock, crops, or farm equipment. :contentReference[oaicite:5]{index=5}
Does VA cap acreage?
No stated acreage limit. The focus is on residential use and comparable sales support. :contentReference[oaicite:6]{index=6}
Can I use farm income to qualify?
Potentially, yes. VA requires documentation and verification of ability/experience as a farm operator when farming income is used to qualify. :contentReference[oaicite:7]{index=7}
What makes a farm property ineligible?
When it’s primarily a business purchase (commercial farm), or value depends on business assets like livestock, crops, or equipment.
Use this checklist before writing an offer on acreage property.
Primary residence requiredResidential purpose onlyAcreage not capped
Must-haves
Home on the land
Veteran occupies as primary residence
Property is primarily residential
Comparable sales support residential-with-acreage value
What cannot be included in value
Livestock
Crops
Farm equipment or supplies
Often OK (when residential)
Barns, sheds, corrals, stables
Pastures and typical rural improvements
Farm income, if documentable and experience is verified
Common red flags
Commercial farm operation is the main purpose
Value relies on business assets
No good residential comps (only ag/commercial sales)
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