VA Loans: Interpreting Your Employment and Income Data
There can be some mystery when applying for a VA loan, especially if it’s your first time. How does the lender interpret the information you enter on a VA mortgage loan application? Is there an arbitrary system the lender compares your details with to see if you qualify for a loan? Or is the process more flexible than simply comparing your information to a checklist?
Fortunately there is plenty of flexibility built into the process. The Department of Veterans Affairs rules for loan officers has plenty of areas where the lender is required to use their judgment as opposed to relying on a specific type of metric. All VA loan applicants are different, each situation has its own unique needs and the VA rules are set up to accommodate that.
For example, when it comes to analyzing a potential borrower’s income, the Department of Veterans Affairs lender’s handbook says, “Income analysis is not an exact science. It requires the lender to underwrite each loan on a case-by-case basis…” The VA guide also states the lender must use “judgment, common sense, and flexibility, when warranted.”
Your employment record is a key part of the loan application. The lender is instructed to look at the record to analyze your past employment patterns to see if you have a good chance of staying employed in the future. The VA requires borrowers to have income that is “stable and reliable”. One way to tell of your current income will continue is by examining the kinds of training you’ve had, the type of employment you’ve held since that training, and how long you held down those particular jobs. According to the VA,
“In the applicant’s current position, 2 years of employment is a positive indicator of continued employment. It is not a required minimum and not always sufficient by itself to reach a conclusion on the probability of continued employment.”
If the VA were simply using a chart to measure factors A, B, and C, the borrower who has spent two years or at his or her current job, completed school and held several steady jobs would automatically be considered a good candidate; someone who graduated high school, went directly to college and didn’t work while they concentrated on their studies might not be viewed in the same way. But both theoretical applicants could be excellent credit risks. That’s why the VA builds in flexibility to the credit underwriting process for VA mortgages.