![]() Debt is typically defined as money you have borrowed and on which you are making monthly payments over time. If your DTI is within an acceptable range, you’ve successfully checked one of the many boxes needed to obtain a VA loan.ĭTI is your monthly debt payments, including your new house payment of principal, interest, taxes, and homeowners insurance, and homeowner association (HOA) dues divided by your GROSS monthly income. Your debt-to-income ratio is commonly referred to as your DTI, and it's the percentage mentioned above. If you're applying for a VA loan and you know things will be tight if you take on a new house payment, understanding your residual income may save you time and improve your chances of not taking on more than you can handle. Yes, they consider that same percentage that lenders calculate for other types of mortgage, but VA loans use residual income to determine if you'll have enough money left over after you pay essential bills like debt and childcare. When you apply for a mortgage, your lender will use a percentage to determine the size of the loan for which you'll qualify, not how much actual money you have left after you pay your bills. With the exception of VA loans, which is why you're reading this, mortgage loans do not work this way. ![]() Common sense would lead us to subtracting the debts and new house payment from our net income - how much we take home after taxes and deductions - to see how much we'd have left. ![]() When most people think of qualifying for a mortgage loan and whether or not they can afford the monthly payment, they consider the debt they already have and the size of the mortgage payment they are about to take on.
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