In order to qualify for a VA loan, you must prove that you have stable employment and income. Without it, a VA lender cannot fund your loan. Just how do VA lenders verify these items? It depends on where you work at the time. If you are still active in the service, lenders must use a specific method to determine how much you make each month. If you are no longer in the service, a lender will use standard verification methods.
Borrowers Still in the Service
If you are still active in the service, you can provide your lender with your Leaves and Earnings Statement. This is the equivalent of a paystub for those that are not in the military. It lets the lender know how much money you make along with any deductions and taxes you pay. Most lenders require that the date on your Leaves and Earnings Statement be no more than 120 days ago.
However, there’s a catch. If you will be discharged from the service within the next 12 months, you’ll need further proof of future income. Generally, lenders like to see a continuance of income for 3 years. If you will leave the service within a year, you will need another job lined up or have plans to re-enlist if you want a VA loan approval.
Borrowers Not in the Service
If you are no longer in the service, you’ll verify your income and employment the same way any other civilian would. Generally, VA lenders require a 2-year history of your jobs in order to approve you for the loan. This doesn’t mean you must have the same job for 2 years, though.
Let’s say you left the military 12 months ago. Your military work and pay could serve as one year and the job you now hold would cover the second year. The key is showing consistent income since you left the military. Lenders will ask for:
- Paystubs covering the most recent month of employment
- W-2s for the last 2 years (or 1 if you were in the military during the 1st year)
- Tax returns for the last 2 years (or 1 if you were in the military)
Your lender may also request a Verification of Employment. This is an official form that your Human Resources department or immediate manager must complete. It states the date you started at your job; whether you are currently there; and the amount of money you make. Lenders use the VOE as sort of a checks and balances against the paystubs and tax documents you provided.
Keep in mind, any documents you provide the lender must be the originals. If you only want them to have copies, let the lender do the copying. This way they can certify that they saw the originals. This is the only way the VA will accept the documents. They must know that they are the ‘real thing.’
Using Alternative Documentation for Income
Non-military borrowers may have the option to use alternative income verification. This applies to borrowers that don’t have a job, but make enough money in other ways to support the mortgage. This is often a viable option for retired borrowers that have enough money saved up to live on comfortably.
Of course, it in order to use this method, you’ll have to prove that you have enough money to cover the loan for the next 30 years. You’ll also have to verify that the income will continue for the foreseeable future. For example, if you receive IRA payouts, you must prove that you have enough money in the account to continue the payouts of the magnitude you receive right now.
VA lenders verify income and employment in both written and verbal form. They must confirm beyond a reasonable doubt that you make enough money to comfortably afford the loan. Not only do you need enough money to pay the mortgage, though, you also need money to pay life’s daily expenses. The VA considers this your disposable income. They have a threshold you must meet based on where you live and how many family members you have. The more family members you have, the more money you need each month in order to live.
Verifying your income and employment beyond a reasonable doubt will help you secure the VA loan you deserve.