Can A Self-Employed Person Get a VA Home Loan? Part One
One of the important parts of a VA loan application is income verification. VA rules state income must be stable, reliable, and “likely to continue” in order for an applicant to be approved for a VA mortgage. For those currently serving in the military, retired or separated with conventional employment, this is not a problem as pay stubs, employment records and income tax forms can be used to show proof of income that meets VA standards.
But what about those who are self-employed? Whether a veteran owns his or her own business or works as a freelancer for another company, can such employment still meet VA standards so a loan application can be approved?
According to the Department of Veterans Affairs, the answer is yes. For self-employed veterans, VA loan applications can be supplemented by financial statements including year-to-date profit and loss data, tax forms, balance sheets and other paperwork. Those with traditional jobs have their tax forms, pay stubs and W2s, where self-employed and freelance workers have 1099 forms, IRS schedule C forms and other supporting documentation of income.
These types of income proof are acceptable to the VA, but VA rules state, “The financial statements must be sufficient for a loan underwriter to determine the necessary information for loan approval. The lender may require accountant-prepared financial statements or financial statements audited by a Certified Public Accountant if needed to make such a determination due to the nature of the business or the content of the financial statements.”
That means borrowers who are in the habit of doing their own taxes may have to have a CPA review or audit past tax documentation where required. Self-employed and freelance VA loan applicants should consider filing current year taxes through an accountant or CPA in order to have at least one year’s worth of information verified by the independent party–it will save time in the long run and the expense of having the work done could be considered a tax write-off where allowed by law.
The VA requires at least two years of individual tax returns and all related paperwork, but additional years or tax periods may be required to prove what the VA calls a “satisfactory earnings record”. Self-employed business owners should know the VA also requires a credit report on the business in some cases in addition to a personal credit check.