VA Loan Applications: Verification of Income

VA loan requirements include verification of income. Borrowers must show stable, reliable income that is likely to continue. The VA generally asks for at least two years worth of documentation showing such income and employment. But some borrowers can’t show two years of stable employment, especially recent military retirees and those who have started new careers after separating from the military. Can these VA loan applicants still get a VA home loan?

The answer depends on the circumstances. The VA rules do say that, in general, less than a year’s worth of employment is not considered to be stable and reliable. That said, the VA Lender’s Handbook states, “… 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.”

The last sentence of that guidance is an important hint for VA borrowers in such circumstances. A borrower may wish to request a new employer’s written feedback to supplement the VA loan application. In these cases, it’s best to ask the lender for advice before getting the employer to commit; chances are the lender will need such statements to come directly to the loan officer rather than from the veteran.

Much in the same way that borrowers aren’t permitted to furnish copies of credit reports or other third-party data needed to approve a VA mortgage loan, the lender may require an employer’s communication come directly to or via the bank.

Another factor in employment less than 12 months is the type of training or education needed for that position. In the eyes of the VA, a highly skilled, training-intensive position carries a greater prospect for long-term work. According to the VA rules, the lender must “…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.”

The rules also say, “…an explanation of why income of less than 12 months duration was used must accompany the loan submission.”

As with other grey area aspects of some VA loan applications, the Department of Veterans Affairs offers the lender some flexibility in making the call. Borrowers should know the decision to approve or deny VA mortgage loan applications in these circumstances is not arbitrary, but done after an examination of the situation on a case-by-case basis.