VA Loan Employment Requirements and Income Verification
To get a VA loan, lenders require eligible Veterans to have steady, reliable income. While most VA loan applicants' primary source of income is a job, that's not always the case.
Here we look at the employment requirements when getting a VA loan and the primary considerations when it comes time for your lender to verify income.
VA loan employment scenarios vary by applicant, but lenders typically want to see two years of consistent, bankable income when getting a VA loan. While helpful for loan approval, it doesn't necessarily mean you have to be at the same job or company during those two years.
If you've yet to be on the job for two years, it's still possible to get a VA loan, but lenders typically need to ensure your education, training and previous employment line up with your current job.
It all comes back to stability. If your lender determines your job aligns with your prior training and experience and believes that your income source will continue, you're often able to move forward. However, if there's any question on stability, your lender may require you to wait until you've been on the job for a reasonable amount of time - typically 12 months.
Another VA loan employment consideration is when you have a gap in employment.
Requirements on gaps in employment vary by lender and length of the job gap, but if the gap in employment exceeds six months, you may need to be on the job for six months to a year to show your current job is stable.
Again, these requirements vary by lender and length of the job gap. Shorter gaps in employment often mean a shorter wait time or no wait at all.
It's also possible to get a VA loan when separating from service. Lenders typically require you to have a job lined up and the ability to provide documentation from the employer with your job description, salary/pay structure, location and other things.
In these cases, it's all about consistency. Your lender will consider your education, work history, and MOS to determine if they align with the civilian job. If the lender determines they align, you may be able to get a VA loan before your first day on the job.
It's also possible to get a VA loan without a job.
Veterans collecting VA disability, Social Security and other retirement-related revenue sources may also use their VA loan benefits. Your income will need to meet the VA's residual income guidelines - meaning you'll need to have a certain amount of discretionary income left over each month after major expenses, including the mortgage payment.
Employment is not a VA loan requirement. Only some manner of steady, bankable income is. As long as the Veteran has a verifiable and stable income stream, it's possible to get a VA loan.
Remember that income isn't the only factor when getting a VA loan. You will also need to meet the lender's credit score requirement, no matter the income source.
If a borrower has a substantial portion of their income coming from commissions, the Department of Veterans Affairs requires verification of the commissions amount paid year-to-date, plus the basis of the employee’s pay arrangement.
The borrower must show the lender documentation of their commission salary and how often they are paid commission. The VA standard for stable income derived from commissions includes the requirement that the borrower has received such income for at least 24 months.
Earning commission is not a barrier when getting a VA loan, but it must be established when commissions are paid, for how long and what percentage of annual income is made up by commission. Borrowers who cannot provide this information are not automatically denied for a VA loan. However, this can complicate the process of buying a home.
Talk to your lender and make sure you meet the requirements if you have a commission-based income.
To assure steady and reliable income, lenders will need to verify your job history and income.
To verify income, lenders typically require documentation. Documentation varies by borrower and employment situation but may include:
Outside of documentation, such as pay stubs and tax forms, VA lenders typically verify your employment by directly contacting your employer. Policies vary by lender, but your lender will typically request information such as:
Typically a verbal Verification of Employment (VOE) is enough, but there may be instances where your lender requires a full written VOE. A full VOE generally happens with multiple income streams or when there is a discrepancy in pay or the date of employment.
If your employment changes nearing closing, contact your lender immediately. It's better to meet that head-on than wait.
To verify employment for those still serving, expect your lender to request a Leave and Earnings Statement (LES). Your LES contains the financial information needed to verify income and move forward with the loan process.
VA loan employment requirements vary by lender, but all lenders will expect a manner of stable and reliable income to get a VA loan. If you have questions on VA loans and employment, leave a comment below. If you're ready to start your VA loan, we've compiled a list of the top VA lenders by loan volume here.
