Am I Eligible For a VA Home Loan If I’ve Worked Less Than a Year?
VA Loans have specific requirements for credit, income, and employment. When it comes to the VA’s employment requirements, the rules state the lender must verify a VA loan applicant’s employment status according to what has been listed on the application.
The lender does this by contacting or otherwise verifying that the borrower has indeed worked or is currently working for the employers named on the application. But some borrowers wonder if their employment history–or lack of one–could hurt them when it’s time to apply for the VA mortgage.
The standard for employment, when used to approve or deny a VA home loan, is that the job must be “stable and reliable”. VA Loan rules state simply, “Verify a minimum of 2 years employment.” But the rules also add,
“If the applicant has been employed by the present employer less than 2 years:
• verify prior employment plus present employment covering a total of 2 years,
• provide an explanation of why 2 years employment could not be verified,
• compare any different types of employment verifications obtained (such as, Verification of Employment (VOE), pay stubs, and tax returns for consistency), and
• clarify any substantial differences in the data that would have a bearing on the qualification of the applicant.”
Some will read the VA requirement and misinterpret the two-year minimum employment rule. It does NOT mean the borrower must have his or her current job for 24 months or longer. Instead, the VA rules refer to a two-year minimum for TOTAL employment. If a borrower held a three-month summer job, then accepted a new position elsewhere that has been held for a year and nine months, that could (technically) be a minimum of two years (depending on circumstances).
All that said and clarified, are there situations where a borrower who only has one year or more of total employment might qualify for a VA guaranteed home loan?
According to the VA Lender’s Handbook, Chapter Four, Section Seven, “Generally, employment less than 12 months is not considered stable and reliable. However, it may be considered stable and reliable if the individual facts warrant such a conclusion. Carefully consider the employer’s evaluation of the probability of continued employment, if provided.” This requires the lender to, “Assess whether the applicant’s training and/or education equipped him or her with particular skills that relate directly to the duties of his/her current position. This generally applies to skilled positions. Examples include nurse, medical technician, lawyer, paralegal, and computer systems analyst.”
And finally, the VA requires a written explanation if the lender chooses to move forward with the loan. “If the probability of continued employment is high based on these factors, then the lender may give favorable consideration to including the income in the total effective income. An explanation of why income of less than 12 months duration was used must accompany the loan submission.” In these cases approval or denial of the VA mortgage loan is at the lender’s discretion, provided the borrower meets all other VA loan requirements.
Do you have questions about the VA mortgage loan process? Ask us in the comments section.
About Joe Wallace
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.