You know you need income to qualify for a VA loan, but what if you have part-time income? Are you excluded from the chance to secure a loan?
There’s no cut and dry answer to this question, unfortunately. It really depends on your situation.
Technically, yes you can use income from a part-time job, but only if it’s consistent. Just what does consistent mean in the eyes of a lender? We discuss this below.
What is Part-Time Income?
Defining part-time income will help you learn if you fall into this category or not. If you work less than 40 hours, you are part-time. Maybe you have a second job to help supplement your income or maybe your primary job does not provide you with 40-hours each week.
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Whatever the case may be, you may not have consistent income. For example, if you worked a full-time job and were paid a $50,000 per year salary, that’s easy for the lender to figure out what you make each month. But, if you work 30 hours one week and 39 hours the next week, your income varies a little more. This is riskier for the lender, but it doesn’t mean you cannot get a loan.
How to Prove Part-Time Income
The first trick to getting a lender to use your part-time income is to make sure it’s consistent. The only way to do this is with time. Generally, you need to hold the same part-time job for 2 years before a lender can use the income.
The lender will then take a 2-year average of the income you make. This helps the lender account for the times you work more hours and those that you work less. The average will let the lender know about where you fall most of the time, giving them a better idea of what you can afford.
You’ll provide the lender with the same documents you would provide for a full-time job. You’ll need paystubs covering the last 30 days of employment plus W-2s covering the last 2 years.
The lender will take your W-2s and average them. Let’s say for example, you made $45,000 one year and the next year you made $55,000. The lender won’t use the $55,000 because there’s no guarantee you will make that amount again this year. Instead, they will average the two years:
($45,000 + $55,000) /2 = $50,000
The lender would then figure out your gross monthly income as:
$50,000/12 = $4,167
They would the make sure that your current paystubs support this average income. They will look at your YTD income to make sure you are on pace to make that much this year too. Let’s say your paystub was from February 28th and showed that your YTD was $8,200. You would then be on pace to make $4,167 per month.
If, however, the paystub showed $3,000 YTD, the lender would likely have an issue. They may make you wait a few more months into the year to see if your income increases and the average pans out or they may not give you a loan at all. It depends on the level of risk they see in your part-time income.
Why You Can’t Use a New Part-Time Job
You might wonder why a new part-time job wouldn’t be accepted. After all, you can often have a new full-time job and still get a loan. However, part-time jobs are riskier. There is no guarantee of future employment. Without a consistent history of at least 2 years of part-time income, the lender cannot beyond an unreasonable doubt believe that you will have the same income moving forward.
Showing the consistency of receiving the income over the last 2 years is a way to reassure the lender that the income is consistent.
The bottom line is that the longer you have a part-time job, the more likely it is that you can use it for qualifying purposes. Whether it’s your main job or you use the income to supplement your main income, you need a history of it. The lender needs to account for the ups and downs that you’ll likely experience with this type of income.
Because VA lenders can add their own requirements on top of what the VA requires, you may have to shop around. Find a lender willing to take your part-time income and use it for qualifying purposes. It can help increase your disposable income, which is what the VA looks at to determine if you can afford a loan or not.
Meta Description: You may be able to use part-time income to qualify for a VA loan, but you’ll have to meet specific requirements first.