A guide to DTI for VA loans

Quick insights

• Your debt-to-income (DTI) ratio compares your monthly debts with your gross monthly income. Lenders use this ratio to determine whether you can qualify for a loan.
• The preferred DTI for a Department of Veterans Affairs (VA) loan is 41% or lower.va-loan-requirements-experian However, lenders may allow for a higher DTI based on your income, credit history, ability to make a down payment, and if your residual income (balance available for family support) exceeds the guideline (as determined by the VA’s residual chart) by at least 20%.
• The same DTI requirements apply to VA construction loans, but these may have additional expenses that can increase your overall DTI.

With the potential for a 0% down payment and competitive interest rates, U.S. Department of Veterans Affairs (VA) loans can be a great benefit for veterans of the U.S. Armed Forces who want to buy a home.va-loan-requirements-experian If you’re an eligible veteran applying for a VA loan, one factor your lender will consider is your debt-to-income (DTI) ratio.

To help you understand, let’s look at how to calculate your DTI and the maximum DTIs that may be allowed for different VA loans.

What is your DTI?

Represented as a percentage, your DTI shows lenders how much of your monthly income will be needed to cover your mortgage, as well as other existing debts—such as credit card bills and car payments. A higher DTI may indicate a higher level of debt, which may make it harder for you to repay your mortgage from a lender’s perspective.

Residual vs. back-end DTI

When talking about DTI, lenders refer to your back-end DTI and also consider residual income, which is the net balance available for family support that a veteran has remaining monthly (after paying all their expenses, housing/utilities/debts). Your back-end DTI includes current debts (like credit cards, auto loans, student loans, etc.) and your monthly mortgage payment, which includes the principal and interest on the loan, homeowners insurance, property taxes, mortgage insurance and homeowner association (HOA) fees.

Why does DTI matter for VA loans?

VA loans are designed to help veterans by allowing them to buy a home with as little as 0% down. Because VA loans are backed by the U.S. government, lenders may also relax their credit score requirements.va-loan-requirements-experian However, lenders still want assurances that you’ll be able to repay your loan, so a low DTI can help reassure lenders that you’re a good candidate.

What is the maximum DTI allowed for a VA Loan?

Lenders usually look at your DTI ratio for all types of loans. To qualify for certain loans, you may need to have a DTI that doesn’t exceed a specific percentage. The VA sets a guide of 41% DTI and meeting VA Residual Income for qualifying. This is higher than a conventional loan, where lenders prefer a DTI of 36% or lower.va-loan-requirements-experian

However, lenders can allow borrowers with higher DTIs to qualify based on factors such as their credit score, income sources and financial history. In some cases, borrowers with a higher DTI than 41% can still qualify for a VA loan based on other lending criteria.ec-fm-b3-6-02-2025ec-fm-b3-6-02-2025

What is the DTI calculation formula?

Your DTI is determined by dividing your fixed monthly expenses by your gross monthly income.

Your fixed monthly payments may include:

• Mortgage payments (including principal, interest, taxes and insurance)
• HOA fees
• Monthly minimum credit card payments
• Car loans
• Student loans
• Personal loans
• Alimony or child support payments (if applicable)
• Other debts you’re required to pay on a monthly basis

Your gross monthly income is your total income before any deductions, like taxes or retirement contributions, are subtracted from your paycheck. Income sources may include:

• Salaried income: If you receive a regular salary, you can take your annual salary and divide it by 12.
• Hourly income: If you receive an hourly income, or your income is based on bonuses or commissions, then divide how much you earn per year by 12.
• Self-employment income: If you work in a contract role or are self-employed, your gross monthly income will be your gross income minus any deductible expenses.
• Pension and disability: If you receive a pension or disability payments, these may also count toward your gross monthly income.
• Investment income: This may include income from financial investments or investment property income.

If you have multiple income streams, add them all together to determine your gross monthly income.

To calculate your DTI, you need to add up all of your fixed monthly expenses and divide them by your gross monthly income. For example, if your fixed monthly debts are $2,400 a month and your gross monthly income is $6,000 a month, your DTI would be approximately 40%.

What is the maximum DTI for a VA construction loan?

If you’re applying for a VA construction loan, the maximum DTI allowed is still 41%, just like the standard VA loan.va-loan-requirements-experian However, construction loans can come with additional requirements that might influence how your DTI is evaluated.

• Interest payments during construction: Since a VA construction loan finances the building of a home, you’ll likely have to make monthly interest-only payments while the home is being built. These payments are typically lower than the full mortgage payment, but they still count toward your DTI calculation.
• Property valuation: Lenders may be more lenient with higher DTI ratios if the value of the property being built is expected to be significantly higher than the loan amount.
• Residual income: Lenders will typically give greater consideration to your sources of income with a construction loan. After all, if you have a high DTI but also have higher earnings, it’s likely you’ll still have more funds available to cover expenses as they arise.

Chase does not offer VA construction loans at this time.

What if your current DTI is too high?

If you’re looking to get a mortgage and find that your DTI is higher than the lender will allow, there are ways to potentially bring it down:

• Look for a more affordable home: A high DTI may be a sign that you’re trying to buy more home than you can afford. Instead, it may make sense to look for a more affordable home until your income increases, your debts go down or you can provide a larger down payment.
• Take out a smaller loan: If you find that your DTI is too high, it may be a sign that you’re taking out a larger mortgage than you can afford. Setting aside more money for your down payment can also help lower the amount you’ll need to borrow, which can lower your DTI.
• Pay off or consolidate existing debts: If your high DTI is due to high-interest debt (like credit cards), paying down your balances can lower your DTI. Consolidating your debt may also help bring down your monthly payments.

In summary

Your debt-to-income ratio is an important metric to consider when taking out a VA loan. While the standard DTI limit for most VA loans is 41%,va-loan-requirements-experian lenders make the decision. A borrower’s creditworthiness, down payment and income history are among the factors usually considered. If you’re applying for a VA construction loan, you can expect similar DTI guidelines. However, additional factors—like the value of the property and the construction timeline—will also be considered.

If you’re trying to decide whether a VA loan is right for you, talking to a home lending expert can be a good way to get started.