Employment and Income Verification for VA Home Loans
When a first-time home buyer applies for a VA home loan, they are sometimes surprised to learn how detailed the Department of Veterans Affairs requirements are when it comes to disclosing income, residency and other factors needed to process the loan application. The VA needs a record of past employment history, residences, lines of credit and many other details in order to get a complete picture of the VA mortgage applicant.
If the applicant is still in the military, there are specific, VA-mandated ways of verifying that status. When the applicant is not still a member of the military, the VA requires at least a two-year employment history that includes the most recent military and non-military employers within the last two years.
But the VA also requires an income verification process separate from the employment verification. Employment and income are two important factors; the VA needs a record of both. The VA will examine pay stubs, tax records, and other data to see how consistent they are; when it comes to non-military employment the VA requires pay stubs and Verification of Employment documents that are no more than 120 days old. These documents can be up to 180 days old for new construction loans.
The VA has a specific form for Verification of Employment, and it must be an original. Pay stubs may be originals or copies but the lender must certify that copy is “a true copy of the original” so it’s best to let the loan officer make a copy of the original document rather than providing a photocopied version. There is one exception–Department of Defense employees are allowed to furnish computer printouts of the pay stubs they get via myPay.
For non-military employers, the VA also allows “alternative documentation” for employment verification. According to the VA, “Alternative documentation may be submitted in place of a VOE if the lender concludes that the applicant’s income is stable, reliable, and anticipated to continue during the foreseeable future; that is, if the applicant’s income qualifies as effective income. 2 years employment is not required to reach this conclusion.”
Alternative documentation is basically one month of the most recent pay stubs, W2 tax forms from the the last two years and the lender confirming the applicant’s employment status by phone. The VA guidelines for alternative documentation tells lenders to use standard documentation when an employer refuses to verify over the phone, or when “…the pay stubs or W-2 forms are in any way questionable as to authenticity.”