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If you’re an eligible member of the military community, the VA home loan can be a helpful tool you’ve earned with your service. It can help make becoming a homeowner more than just a dream but your new reality.

But let’s be honest – one of the more stressful aspects of the VA home loan process may be ensuring you check all the boxes around eligibility requirements. One crucial aspect of the approval process is demonstrating you meet certain employment and income requirements set by the VA and lenders.

In the article below, we’ll offer clarity on the process of verifying your employment history, addressing any gaps, and ensuring you meet VA residual income standards.


Qualifying Income Standards

When it comes to VA loan income requirements (as with most other loan types), there are three key factors lenders typically evaluate:

  • Stability – They want proof of a reliable job history and income stream, usually covering at least the past two years. Understandably, they get a bit nervous about frequent job-hopping or major gaps in employment over a month or so, and those situations may require additional documentation.
  • Continuity – Your qualifying income can’t be temporary. It needs to be something expected to continue into the foreseeable future. For example, certain retirement payments set to expire in a couple of years may not count.
  • Sufficiency – At the end of the day, you must make enough money to cover that new monthly mortgage payment, on top of your existing bills, debt payments, and typical household expenses.

The good news is that the VA allows lenders to consider various income sources – traditional W-2 jobs, self-employment income if property documented, disability pay, child support, and much more.


Verifying Employment History

To properly verify your work history, VA lenders will typically require the following documentation:

  • W-2s and personal tax returns for the past 2 years
  • Current pay stubs confirming your employment
  • Written explanations for any gaps in employment over 30 days

If you are self-employed or have variable income from investments, additional paperwork like recent business tax returns, profit/loss statements, and bank statements may be necessary as proof.

For active military, service records and leave/earnings statements can fill in the blanks.


Addressing Employment Gaps

It’s understandable to have some gaps in your employment record over the years. Certain absences from work are considered acceptable by VA underwriters, such as:

  • Brief periods of a few weeks or months between changing jobs
  • Temporary leave for family matters like maternity or parental leave
  • Pursuing further job-related education, training or certification

For longer gaps, such as 6+ months, you’ll likely need to provide supplementary documentation explaining the situation and proving your income has been re-established. This could include sources like school transcripts, rehire letters from the same employer, or medical records.


Meeting VA Residual Income Tests

The final income factor is meeting the residual income requirements, which considers your household size and typical living expenses. This ensures you have ample remaining income (the residual amount) after paying debts and the new mortgage payment.

The specific residual income benchmarks are set by the VA based on your geographic region’s costs of living and your family size. Your calculated household residual must exceed the VA’s threshold for your area. This income test helps prevent VA borrowers from becoming overextended on debt.


Ready to Embrace the Homeownership Dream?

Verifying your employment and income situation is undoubtedly a crucial hurdle in the VA home loan journey. But don’t let initial roadblocks discourage you from pushing forward. With some preparation, the right guidance from a knowledgeable VA lender, and your hard-earned service advantages, that dream of homeownership may be well within reach.

This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to your individual situation.