More on Spouse Income and VA Loan Applications

Yesterday I wrote about when a veteran can include spouse income on a VA loan application; the gist being that unless the spouse is a co-borrower or contractually responsible for part of the VA mortgage, that income may not be included.

But the VA rules about spouse income go farther than simply saying the veteran can't include that on the VA loan application (unless the spouse income qualifies). Did you know the Equal Credit Opportunity Act prohibits a lender from asking about spouse income? The bank cannot question you by law about a spouse's income unless:

• The spouse is "contractually liable"
• The applicant needs the spouse's income to qualify for the loan
• The husband and wife live in a "community property" state
• The spouse is providing maintenance, alimony or child support.

The first of these four items we've already discussed. But what about the other three?

In cases where a military member needs the additional income to qualify for the loan, circumstances may require the spouse to co-borrow. A veteran recently out of the military who started the loan process before getting out, for example, might not technically qualify for the loan because of the change in income. In this case it would be a very good idea to have the spouse's income listed as a qualifying factor.

Why would a recently separated military member need spouse income to qualify for a VA home loan? One common situation has to do with those who have recently retired or separated from the military. If a new retiree or someone recently separated in the last six months applies for a VA home loan, they don’t meet the VA’s two-year employment rule. The VA wants documentation for non-military employment for two years or more.

The VA DOES consider those with less than two years of civilian employment experience, but explanations must be made why there isn’t a two-year civilian work history. Some applicants feel more comfortable having spouse income included in the loan application to make a stronger case to the VA for loan approval.

We’ll look at the other circumstances in our spouse income list in my next blog post.