VA Loan Rules: Spousal Income
It is easy to assume that a VA loan application with spousal income included would be stronger than without it; the combined incomes show more earning power and if the amount of debt is well within the VA requirements, it would seem like a logical choice. In fact, VA loan rules instruct lenders specifically, “Verify and treat the income of a spouse who will be contractually obligated on the loan the same as the veteran’s income.”
So why would a borrower wish to leave spousal income off of a VA home loan application? There could be many reasons, including a situation where the borrower anticipates a change in his or her marital status. But there are other reasons why spouse income may not necessarily be included. The Equal Credit Opportunity Act has rules instructing lenders NOT to ask about spouse income unless, according to the VA Lender’s Handbook, one or more of the following situations apply:
- Spouse will be contractually liable.
- Applicant is relying on the spouse’s income to qualify.
- Applicant is relying on alimony, child support, or separate maintenance payments from the spouse or former spouse.
- Applicant resides in a community property State or the security is in such a State.
The VA Lender’s Handbook adds, “In community property States, information concerning a spouse may be requested and considered in the same manner as for the applicant, even if the spouse will not be contractually obligated on the loan.”
Community property states are those states with laws that basically divide financial responsibilities for married couples evenly for all purchases and financial obligations made during the marriage.
In a community property state, the spouse’s income may be required data on the VA loan application form. But only verifiable income may be included; spouse income from eBay sales, hobbies or other activities that don’t meet the VA definition of “stable, reliable, and likely to continue” may not be included.
When it comes to alimony, child support, and maintenance payments, VA loan rules don’t force the borrower to list such payments as income. Borrowers who choose to leave out this information should know the payments must be identified and verified in order to count towards the borrower’s debt-to-income ratio.