Minimum History of Employment
A minimum of 2 year history in the same industry/line of work is required in most
instances but it’s not a universal rule.
Recent graduates can satisfy the two year requirement by providing proof of
schooling with a degree for the line of work you are now
employed in.
Active duty members do not need a two year history as
long as the minimum service requirement for eligibility
has been met.
Self employed borrowers must always have a two year history of self
employment and must show a two year history of filed tax returns to meet the
24 month requirement.
Income Calculations
If you are salaried, your base income will be used to qualify you for the loan.
However, if you are an hourly employee with varied hours, more than likely, your income will be averaged
over an extended period such as 18 or 24 months depending on the situation.
Overtime, bonuses, commission and part time employment must have a 24 history in order to be included
in the qualifying income. The income will be averaged out over 24 months. Verification of likelihood to
continue will also be required.
Non taxable income can be grossed up to account for the non-taxable status.
Retirement, Disability, alimony and child support income does not require a 2
year history but verification that it will continue for at least 3 years is required in
order for it to be included.
ASSETS
No down payment does not mean no cash needed
As mentioned in the closing cost section, there are fees that will need to be paid as part of your home
purchase or refinance.
You must have sufficient funds to cover any closing costs or fees not paid by the
seller or lender credit.
VA does not require additional cash to cover a certain number or mortgage
payments or unplanned expenses (cash reserves), however, your ability to
accumulate liquid assets and the amount of assets currently available is taken into
consideration in the overall credit worthiness analysis.
Allowable source of funds
Funds for your down payment, closing costs and other expenses can come from:
• Checking/savings accounts
• Investment accounts
• Retirement account
Gift funds from a relative are an allowed source of funds to cover down payment and or closing costs.
The gift will need to be verified and paper trailed via bank statements and a gift letter will need to be signed
by your and the gift donor .
Funds from unsecured loans (signature loans, credit card advances) or funds that can not be documented
are not acceptable source of funds.
Federal regulations require that all deposits into your account be documented.
In the instance of payroll deposits, nothing will need to be done if the deposit shows as a Direct Deposit
from your employer.
All other deposits will need to be explained and documented.
Debt to Income Ratios
A debt to income ratios is the percentage of your total debt obligation, including the new estimated
mortgage payment, all debts shown on your credit report, as well as alimony, child support etc, as
compared to your gross qualifying income.
EXAMPLE
The rule of thumb is that your debt to income ratio should not exceed 50% of the usable, gross monthly
income. However, higher percentages can be approved.
In addition to the debt to income ratio requirements, VA also has residual income requirements. VA residual
income looks at how much income is available after all monthly liabilities, including tax withholdings,
utilities and child care, are accounted for.
Residual Income By Region
For loan amounts of $80,000 and above
Family
Size
Northeast Midwest South West
1 $450 $441 $441 $491
2 $755 $738 $738 $823
3 $909 $889 $889 $990
4 $1025 $1033 $1033 $1117
5 $1062 $1039 $1039 $1158
over 5 Add $80 for each additional member up to a family of
seven
2400/5000= 48%
Deferred student loans
If student loan repayments are scheduled to
begin within 12 months of the date of loan
closing, the anticipated monthly payment will
be included.
If you are able to provide evidence that the
loan(s) will be deferred for a period outside
that time frame, the payment will not be
included.
Qualifying income: $5000
New mortgage payment: $2000
All other obligations: $400
Monthly debt payments
The payments shown on
your credit report will be
used to qualify you. If the
payments are incorrect,
you will be asked to
provide proof of the correct
payment.
Co-signed loans
If you co-signed for someone on a loan and
that loan is showing on your credit report, the
payment will be included in the ratios unless
you are able to provide evidence that the other
person on that loan has been making the
monthly payments from an account that you
are NOT a co-owner on.
Alimony/child support
You will be expected to
truthfully declare that
you pay alimony or child
support. You will be asked
to provide your divorce
decree and/or child support
order to verify the amounts.
Non-purchasing spouse
You should be aware that if you purchasing a home
in a community property state such as California
and are married, your spouse’s credit report will be
required. His/her debts will be included in the ratio
calculations even if he/she is not going to be on the
purchase or loan.
Documentation Checklist
The following is a general list of documentation required for a home loan application.
Not all items will apply to your situation
CREDIT / IDENTIFICATION/ ELIGIBILITY
F Copy of driver’s license or other photo I.D.
F Copy of divorce decree
F Copy of bankruptcy papers, including all schedules and discharge, and credit explanation letter for
reason for bankruptcy.
F Letter of explanation on any late payments, collections, charge off’s or derogatory credit
F Letter of explanation for all recent credit inquiries
F DD214 if not active duty or Statement of service if active duty
EMPLOYMENT/INCOME
F Pay stubs (LES) for the most recent 30 days available
F W-2's for the previous two years
F Federal tax returns for the previous two years. All pages and schedules must be included
F If self-employed, provide all pages and schedules of last two years’ business tax returns and
corporate K-1's
F Award letter for Social Security benefits, disability or Pension
F Proof of receipt of child support, alimony or any other non-employment source of income
ASSETS
F Provide ALL pages of most recent 2 months’ statements for all accounts; including all checking, savings,
stocks, IRA, 401k, etc. The statements must show your name, account number and the name of the
banking institution. Any non-payroll deposits will have to be explained and documented.
F If funds to close will come from a gift, complete the gift letter (will be provided to you) and the following:
F From the donor - bank statements showing the funds in the donor's account and a copy of the check
from the donor's account
F From you - a copy of the deposit slip showing the gift check deposited into your account
F If funds to close are from sale of home
F Estimated closing statement showing anticipated proceeds
F Copy of final closing statement and deposit slip showing proceeds deposited into bank account
PROPERTY
F Select your insurance agent and provide agent's name, address, and phone number
F If refinance, or if you will be retaining your current home or own other property
F Current mortgage statement
F Copy of insurance declaration page
F If you’re currently renting, provide your Landlord’s name, phone number and address.
F 12 months canceled rent checks will be necessary for private landlords. If you live with a family member,
letter stating you live rent-free will be required
Eligible Veterans often bypass the program as a viable option for a number of reasons.
First, they may not know all the advantages. Second, they may think getting a VA loan is a hard or one has to go to the VA for approval.
Last, some lenders don’t take the time to teach Veterans about the program or don’t know much about it themselves.
The VA home loan is a program non-military homebuyers wish they had access to.
key facts.
1. No down payment, no mortgage insurance. These are the biggest advantages. $0 down payment. With a VA loan, you can buy immediately, rather than years of saving for a down payment. And, $0 mortgage insurance. This saves you thousands a year and the typical veteran, with the same income, can get approved for a home worth $50,000 more than a non-vet.
2. Use your benefit over and again. You can use your VA benefit it as many times as you want.
3. Your benefit never expires. Once you have earned eligibility for the VA home loan, it never goes away. You may be eligible to buy a home using a VA home loan, even if you served long ago.
4. Surviving spouses are eligible. Thousands of surviving spouses purchased a home with their fallen partner’s VA benefit. Un-remarried husbands and wives of Servicepersons who were killed in action can buy a home with zero downpayment and no mortgage insurance.
Plus, the VA funding fee is waived.
There’s no way to repay the spouse of a fallen hero, but this benefit surely helps them move forward after.
.
7. Buy, refinance or tap into home equity. A VA loan can use the Interest Rate Reduction Refinancing Loan, or IRRRL, to drop their rate and payment without an appraisal, or even paystubs, W2s or bank statements.
Even homeowners without a VA loan can use a VA refinance. The VA cash-out loan is available to eligible Veterans who don’t have a VA loan currently. But you don’t have to take out cash to use this VA loan option. You can also use it to pay off a non-VA loan.
.
9. Funding fee waivers. VA typically charges a funding fee to defray the cost of the program. It is between 0.50 percent and 3.3 percent of the loan amount, depending on service history and the loan type. Disabled Veterans who are receiving compensation for a service-connected disability are exempt.
10. Buy a condo with a VA loan. You can buy many types of properties with a VA loan, including a single-family (free-standing) home, a home of up to four units, and even manufactured homes. But condominiums are commonly overlooked by VA home buyers
