VA requirements

VA Loan Questions: Military Income

April 23, 2013

VA Loan Questions: Military Income

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A reader asks, “I understand they ask for 2 years work history. What if you are CURRENTLY on active duty and have only been on active duty for a few months, with no prior work history. Is the 2 year requirement waived?”

VA loan rules for non-military employment includes the following as printed in the VA Lender’s Handbook:

“Verification:  General Requirement

Verify a minimum of 2 years employment. 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 verification 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.”

But VA loan rules for military income are different. The borrower may find there is more scrutiny placed on the end of his or her enlistment–how long does the military member have left on the current commitment? Is there evidence that the borrower is likely to stay in the military following the end of the first commitment?

Here’s what VA loan rules tell the lender about those currently on active duty:

“Consider the applicant’s base pay as stable and reliable except if the applicant is within 12 months of release from active duty.

  • Analyze the additional documentation submitted.
  • If the applicant will not be reenlisting, determine whether the applicant’s anticipated source of income is stable and reliable, and/or unusually strong underwriting factors compensate for any unknowns regarding future sources of income.”

Lender standards can also play a role–not just VA loan rules. In these cases it’s important to have a conversation with the loan officer to determine the bank’s requirements as well as the VA loan program’s guidelines. Depending on the circumstances, a military member currently serving may find a lender willing to work with the borrower, but other factors besides employment may figure into that equation.

A borrower with poor credit and minimum work history may have a difficult time until a year’s worth of reliable payments has been established and credit scores improve. A borrower with a strong credit history who has not been in uniform long may have a better chance at VA loan approval.

 Do you have questions about VA home loans? Ask us in the comments section.

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