VA Loans and Non-Military Income

VA loan applicants are required to show proof of income when applying for a VA home loan. The procedures for those serving on active duty are different than for those who are in the Guard/Reserve, or who have retired or separated.

For active duty military,  a current copy of the applicant’s Leave and Earnings Statement would be required along with any additional documentation requested by the lender. But what are the VA loan requirements for members of the Guard, Reserves, and veteran borrowers who aren’t currently serving?

Chapter Four of the VA Lender’s Handbook instructs the lender to verify “a minimum of 2 years employment”. Some reading that line might wrongly interpret that to mean the VA requires a borrower to work in the same job for at least two years, but this is not the case; VA loan requirements only state the lender must verify the borrower has been employed for the last 24 months, and where.

In fact, VA loan rules specifically instruct the lender on what to do if the borrower has only been working at his or her current job a short amount of time. The VA recognizes that many loan applicants may be looking for a house soon after retiring or separating from the U.S. military, and rules are in place to accommodate those situations:

“If the applicant has been employed by the present employer less than 2 years:

• verify prior employment plus present employment covering a total of 2 years,
• provide an explanation of why 2 years employment could not be verified,
• compare any different types of employment verifications obtained (such as, Verification of Employment (VOE), pay stubs, and tax returns for consistency), and
• clarify any substantial differences in the data that would have a bearing on the qualification of the applicant.”

When it comes to pay stubs required for non-military income verification, the rules state those stubs must be less than 120 days old (180 days for new construction loans). The VA requires pay stubs to be originals or “a copy certified by the lender to be a true copy of the original.” Your lender may require you to bring in the original so the lender can make such a certified copy.

Do you have a question about the VA loan process? Ask us in our comments section.

Join us on Facebook