How to Gross Up Income for a VA Loan

If you’re a veteran, active-duty service member, or surviving spouse, VA loans are a powerful way to buy a home. 

These loans don’t require a down payment, and you don’t have to pay private mortgage insurance. But what if your income looks too low to qualify?

That’s where “grossing up” your income can help.

Grossing up means your lender increases your tax-free income on paper. This helps you qualify for a bigger loan or makes it easier to meet the lender’s income rules. If most of your income is tax-free, like VA disability or Social Security, this step could make a big difference.

Let’s break down how grossing up works, and why it could help you buy the home you really want.

Key Takeaways

• Grossing up helps boost your income on paper when it’s not taxed.
• You can gross up income like VA disability, BAH, BAS, and Social Security.
• Most lenders allow you to increase this income by up to 25% for loan qualification.

What Does “Grossing Up” Mean?

When lenders look at your income for a VA loan, they focus on gross income—that means income before taxes are taken out. But what if you get money that isn’t taxed at all?

If your income is tax-free, lenders can adjust it upward to match what it would be if it were taxed. This helps you compare fairly to someone earning taxed income.

For example, if you get $2,000 per month in VA disability benefits, and your lender allows a 25% gross-up, they’ll count that income as $2,500 on your loan application. That extra amount can help you qualify for a bigger loan or improve your debt-to-income ratio (DTI).

Grossing up can make a big difference, especially for veterans who mostly or only receive tax-free income.

Related: VA Disability Pay and VA Loans

Why Grossing Up Matters for VA Loans

VA lenders want to make sure you can afford your mortgage, since these loans don’t require a down payment. That’s why your income plays such a big role in the approval process.

Grossing up tax-free income can help in three big ways:

1. Increases your qualifying income
2. Improves your DTI
3. May help you qualify for a higher loan amount

If you rely on VA disability benefits or Social Security, grossing up could be the thing that gets your loan approved. Without this step, your income may seem too low—even if you can afford the home.

What Types of Income Can Be Grossed Up?

According to VA guidelines, tax-free income includes certain military allowances, child support payments, and some forms of public assistance payments. 

Not all income can be grossed up, but here are some common tax-free types that usually qualify:

• VA Disability Benefits – These are paid to veterans with service-connected disabilities. They’re not taxed, and they can be grossed up. See the 2025 VA Disability Pay Charts here.
• Basic Allowance for Housing (BAH) – Active-duty military members receive BAH to help with housing costs. It’s tax-free and can be grossed up. See the 2025 BAH Rates here.
• Basic Allowance for Subsistence (BAS) – BAS helps cover food costs for active-duty service members. Like BAH, it’s tax-free and can be grossed up. See the 2025 BAS Rates here.
• Social Security Income (SSDI or SSI) – If your Social Security benefits aren’t taxed, they can be grossed up for your VA loan.
• Child Support and Alimony – If these payments are tax-free and you can document them properly, they may qualify too.

How Grossing Up Works

Here’s a simple breakdown of how the process usually works:

1. Find out which income is tax-free. This might be your VA disability pay, BAH, or Social Security.
2. Apply the gross-up rate. Most lenders use 25%, though it can vary by loan program.
3. Calculate the adjusted income. Multiply the tax-free income by 1.25 (if using 25%).

For example, let’s say you receive $2,000 in VA disability pay each month. Grossed up by 25%, your income would now be counted as $2,500 for qualification purposes.

That extra $500 can help you be approved for a larger loan or meet the lender’s income limits more easily.

What Documents Will You Need?

To gross up income, lenders need proof that the income is tax-free. Here are some common documents:

• VA award letter for disability benefits
• Military LES (Leave and Earnings Statement) for BAH/BAS
• Social Security award letters for SSDI/SSI
• Court documents for child support or alimony
• Bank statements (to show deposits, if needed)

Having clear paperwork helps your lender verify the income and apply the gross-up without delays.

What If All Your Income Is Non-Taxable?

If all or most of your income is tax-free, grossing up can make a huge difference. It helps meet two important VA loan rules:

1. Debt-to-Income Ratio (DTI): This shows how much of your monthly income goes toward paying debts. Most lenders want this to be 41% or lower. If your DTI is too high, you may not get approved—unless your income is grossed up. See our guide to VA loan DTI requirements here.
2. Residual Income: This is the money you have left each month after paying bills. The VA requires a certain amount of leftover money, based on family size and where you live.

Note: Grossing up only helps with your DTI, not your residual income. But since DTI is often a dealbreaker, grossing up can still be a big help.

Loan Example for Non-Taxable Income

Let’s say you’re a veteran who only receives:

• $1,800/month in VA disability
• $700/month in Social Security

When you add the two sources, your total income is $2,500/month.

If your lender allows a 25% gross-up ($2,500 × 1.25), your qualifying income jumps from $2,500/month to $3,125/month.

That higher number makes your DTI look better and might help you qualify for a bigger mortgage—even though your actual income hasn’t changed.

What About Other Types of Loans?

Grossing up isn’t just for VA loans. It’s allowed on many other loan types, though the rules may vary:

• Conventional Loans (Fannie Mae & Freddie Mac): Usually allow 25%
• FHA Loans: Usually allow 15%
• USDA Loans: Often allow 25%

Each program has its own guidelines, but most allow some kind of gross-up for tax-free income.

Final Thoughts: Why Grossing Up Matters

VA loans offer a great way for veterans and their families to buy a home with no down payment and low interest rates. But if you rely on tax-free income, qualifying for a loan might be harder than it should be.

That’s where grossing up can help.

By increasing the amount of income the lender counts, grossing up can improve your debt ratio and help you qualify for more house. It doesn’t cost anything—it’s just a smart way to show your real financial picture.

Before you apply for a VA loan, talk to a lender who understands these rules. With the right help and documentation, grossing up your tax-free income could be the key to buying your dream home.

About Post Author

Craig Berry

Craig Berry has spent more than 25 years helping families buy and refinance real estate. In addition to originating mortgage loans, Craig has been providing industry-leading content for more than a decade. Craig has been featured in a number of national publications and websites.