A Guide on VA Loan Debt-to-Income (DTI) Ratio

Your debt-to-income ratio, or DTI, is an important factor lenders consider when you apply for a VA mortgage loan. Learn more in this extensive guide.
Advertising Disclosure.

Advertiser Disclosure: The Military Wallet and Three Creeks Media, LLC, its parent and affiliate companies, may receive compensation through advertising placements on The Military Wallet. For any rankings or lists on this site, The Military Wallet may receive compensation from the companies being ranked; however, this compensation does not affect how, where, and in what order products and companies appear in the rankings and lists. If a ranking or list has a company noted to be a “partner,” the indicated company is a corporate affiliate of The Military Wallet. No tables, rankings, or lists are fully comprehensive and do not include all companies or available products.

The Military Wallet and Three Creeks Media have partnered with CardRatings for our coverage of credit card products. The Military Wallet and CardRatings may receive a commission from card issuers.

Opinions, reviews, analyses & recommendations are the author’s alone and have not been reviewed, endorsed, or approved by any of these entities. For more information, please see our Advertising Policy.

American Express is an advertiser on The Military Wallet. Terms Apply to American Express benefits and offers.

Drawing of a scale on a notepad with 'income' and 'debt' on opposite ends of the scale, balancing outDebt to income ratio DTI concept. Page from a notebook with drawn weights lies on a calculator.

As a veteran or military member, you have access to one of the best home loan programs around: the VA loan.

Meeting the VA’s service requirements is a significant step, but lenders also assess factors like your debt-to-income ratio (DTI) to ensure you can comfortably manage your monthly mortgage payments. If your DTI is higher, it may mean you’ll qualify for a smaller loan amount, potentially requiring you to consider a less expensive home.

Key Takeaways

  • Your DTI ratio shows lenders what portion of your income goes toward debt.
  • Two DTI types exist: front-end (mortgage payment) and back-end (all debts).
  • VA guidelines suggest a maximum DTI, but exceeding it doesn’t automatically disqualify you.
  • Lowering your DTI can improve loan approval chances.
Table of Contents
    1. Key Takeaways
  1. What Is Debt-To-Income (DTI) Ratio?
    1. Front-End DTI Vs. Back-End DTI
  2. Debt-to-Income Ratio for VA Home Loan
    1. How Other Finances Can Impact Loan Approvals
    2. DTI Ratio and Residual Income
  3. How Do You Calculate Debt-to-Income Ratio for VA Loan?
  4. How do I lower DTI for my VA Home Loan?

What Is Debt-To-Income (DTI) Ratio?

Your debt-to-income ratio, or DTI, is an important factor lenders consider when you apply for a mortgage loan. This number reflects how much of your monthly income your debts take up (specifically, the minimum payment on those debts). 

Most loan programs have a maximum DTI to stay at or under to qualify, and lenders can even use DTI to set your interest rate. VA loans don’t have a specific DTI maximum, but it does encourage lenders to look more carefully at borrowers with DTIs over a certain threshold.

Front-End DTI Vs. Back-End DTI

There are two types of DTI lenders look at: front-end and back-end. Your front-end DTI is how much of your income would go to your monthly mortgage payment. So, for instance, if you have a mortgage of $2,000 and a monthly income of $4,000, you’d have a front-end DTI of 50%.

The back-end DTI is a more comprehensive number that shows how much of your income all your debts account for. Using the above example, if you had a mortgage of $2,000, a minimum credit card payment of $250, and a student loan payment of $750, you’d have a DTI of 75% ($3,000 / $4,000). 

Front-end DTIBack-end DTI
Includes only your housing payment
Helps lenders assess whether you have enough income to cover your new mortgage
Includes your housing payment and all other monthly debts
Gives lenders a more comprehensive overview of your finances
Your Mortgage Interest Rate — Let’s Do The Numbers
GET YOUR ACTUAL RATE
Estimated interest rate*
--

The Military Wallet's methodology:


*Rate data provided by RateUpdate.com. The displayed rates come from multiple providers and represent market averages. Your mortgage rate will differ based on individual factors like your credit score as well as differing loan types and terms offered by lenders.


Click "Get Your Actual Rate" to connect with a licensed mortgage lender for a more accurate quote.

Powered by Mortgage Research Center, LLC | NMLS 1907

Debt-to-Income Ratio for VA Home Loan

The Department of Veterans Affairs recommends that borrowers have a DTI of 41% or less to qualify for a VA loan, but it doesn’t outright say that borrowers with DTIs higher than this will be denied.

Qualifying for a VA loan is still possible if you have a DTI over 41%. The underwriter just needs to look more carefully at your application to justify approving your loan.

According to HMDA data, 46% of VA home loan originations in 2023 were for borrowers with a DTI ratio of 43% or less:

How Other Finances Can Impact Loan Approvals

Lenders use more than just DTI to assess your financial capabilities. Your credit score and history with managing debt play a big role too, so if you have a high DTI, a high credit score and spotless credit report can help sway things in your direction.

DTI Ratio and Residual Income

Having more residual income can also help your case. Residual income is money left over after paying your debts each month. Your lender will require a certain amount of it to qualify for a loan. 

If you have 20% more than that limit, it can offset your high DTI. For example, if the lender normally requires at least $1,000 in residual income, you can make up for your high DTI by having $1,250 instead. 

How Do You Calculate Debt-to-Income Ratio for VA Loan?

To calculate your DTI, you need a list of your debts and all the minimum payments they come with. You also need to know how much gross income you bring in each month.

Note: Gross income is the total amount of money you earn each month before any deductions, like taxes, health insurance premiums, or retirement contributions. It’s essentially your income on paper before any expenses are accounted for.

See below for an example of how to calculate DTI:

DebtCost
Student loan payment$300
Car payment$500
Credit card payment$150
Estimated new mortgage payment$2,000
Total monthly debts$2,950
Monthly income$8,000
Front-end DTI 
(Estimated new mortgage payment / Monthly income)
25%
Back-end DTI 
(Total monthly debts / Monthly income)
37%

See What You Qualify For

Select a VA Home Loan Option to Continue:

Home Purchase
Home Refinance
Cash-Out Refinance
Explore My Options
Get Started

How do I lower DTI for my VA Home Loan?

To lower your DTI, pay down your debts more aggressively — particularly on revolving debt, like credit cards. This will lower your monthly payment, reducing your DTI. If you can pay off a debt entirely (say, your car loan), that could be even more effective.

You can also work to increase your income. This might mean taking on some freelance work or a side gig or asking for more hours or a raise at work. 

Finally, you could also restructure your debt. Sometimes, consolidating all your debts to a single loan can help reduce your interest rate and your total monthly payments which would also reduce your DTI.

Related Posts

About Post Author

Get Instant Access
FREE Weekly Updates! Enter your information to join our mailing list.

Reader Interactions

Leave A Comment:

Comments:

About the comments on this site:

These responses are not provided or commissioned by the bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the bank advertiser. It is not the bank advertiser’s responsibility to ensure all posts and/or questions are answered.

The Military Wallet is a property of Three Creeks Media. Neither The Military Wallet nor Three Creeks Media are associated with or endorsed by the U.S. Departments of Defense or Veterans Affairs. The content on The Military Wallet is produced by Three Creeks Media, its partners, affiliates and contractors, any opinions or statements on The Military Wallet should not be attributed to the Dept. of Veterans Affairs, the Dept. of Defense or any governmental entity. If you have questions about Veteran programs offered through or by the Dept. of Veterans Affairs, please visit their website at va.gov. The content offered on The Military Wallet is for general informational purposes only and may not be relevant to any consumer’s specific situation, this content should not be construed as legal or financial advice. If you have questions of a specific nature consider consulting a financial professional, accountant or attorney to discuss. References to third-party products, rates and offers may change without notice.

Advertiser Disclosure: The Military Wallet and Three Creeks Media, LLC, its parent and affiliate companies, may receive compensation through advertising placements on The Military Wallet. For any rankings or lists on this site, The Military Wallet may receive compensation from the companies being ranked; however, this compensation does not affect how, where, and in what order products and companies appear in the rankings and lists. If a ranking or list has a company noted to be a “partner,” the indicated company is a corporate affiliate of The Military Wallet. No tables, rankings, or lists are fully comprehensive and do not include all companies or available products.

Editorial Disclosure: Editorial content on The Military Wallet may include opinions. Any opinions are those of the author alone, and not those of an advertiser to the site nor of  The Military Wallet.

Information from your device can be used to personalize your ad experience.