What landlord experience requirements must be met for the VA to accept rental income for loan qualification?
There are many types of rental properties that are specifically dealt with in Chapter 4 of the VA Lender's Handbook.
Keep in mind that if the Veteran can support the mortgage payment without using rental income then landlord experience and cash reserves are not required.
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If a Veteran is not employed, may the income of the non-Veteran spouse be used to qualify the Veteran for the home loan?
If the spouse is on the application, you can use the spouse's income.
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Can the income from a non-qualifying spouse (a spouse not listed on the application) be used to qualify the Veteran?
If the spouse is not on the application you cannot use his/her income when completing the loan analysis form. However, should the spouse choose to provide documentation concerning his/her employment (e.g. pay stub and W-2), the underwriter could consider removing the spouse from the residual requirement. The spouse cannot be forced to provide this data.
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Can we use income of a trailing spouse?
Income from a trailing spouse generally cannot be considered as the spouse does not have employment in the new location and there is no guarantee of future employment. Use of this type of income should be considered only on a case by case basis and documented in the remarks section of the loan analysis sheet for specific cases, consult the Regional Loan Center with jurisdiction.
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Is it possible to consider the income of an applicant who has worked in a current job for less than one year?
If the Veteran does not have a full year on his/her current job (even if it is not related to previous employment) the VA does not require an automatic denial. Careful review and judgment is required by the underwriter and reasons for the decision should be annotated in the remarks section of the loan analysis worksheet.
Specifics concerning income stability can be found in Chapter 4 of the VA Lender's Handbook. In all cases employment must be verified for a two-year period and any gaps of employment addressed by the applicant in a written format.
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Can commission income be considered a source of income if the applicant has not been receiving it for two years?
If the applicant has not been receiving commission income for a two-year period, the underwriter must carefully review the applicant's previous work experience and commission history. If the applicant has been receiving commissions for at least one full year and has a background in the field it may be possible to use that income or offset some debt. If the Veteran has not been receiving commission income for at least a year, it is unlikely that this source of income may be used. The underwriter should address the use of any income with less than a two-year history in the remarks section of the loan analysis form and provide supportive documentation in the loan file. Specifics on commission income, including the required paperwork, can be found in Chapter 4 of the VA Lender's Handbook.
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What length of time should the applicant be self-employed to consider it a source of income?
The VA prefers the applicant to be self-employed for a two-year period. The underwriter may consider a candidate that has a full year of documented self-employment and past regular employment or education in the same line of work.
Specifics concerning self-employment income can be found in Chapter 4 of the VA Lender's Handbook.
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What else can be considered to compute net income for a self-employed applicant?
Depreciation claimed on tax return statements can be added to net income to calculate qualifying income. Should the underwriter choose to include additional items in net effective income, these must be specified on the loan analysis form in the remarks section.
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Can Year to Date (YTD) Profit and Loss (P&L) statement earnings be used to derive income for self-employed applicants? If so, must the P&L statement be audited or prepared by an accountant?
The VA will average the earnings based on a YTD P&L statement if they are consistent with previous earnings. Generally VA does not require financial statements to be audited. Under some circ*mstances the underwriter may feel it is necessary to obtain an audited financial statement to clarify income or resolve discrepancies. Specifics concerning self-employment documentation can be found in Chapter 4 of the VA Lender's Handbook.
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Can part-time employment be considered as additional income for an applicant that also has a full-time job?
The VA requires that overtime, part-time and bonus income is documented as consistent over a two-year period and is likely to continue. This is to show that the income is stable and the Veteran is able to work beyond the normal work hours over a long period. If the income has been received consistently for 12 months and is likely to continue, the underwriter may choose to offset debt with this income. Any income received for less than a 12-month period may be considered as a compensating factor by the underwriter. Specifics concerning overtime, second job or bonus income can be found in Chapter 4 of the VA Lender's Handbook.
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What are the requirements to consider disability compensation as a source of income?
There is no time of receipt required to use disability income. Generally the lender must document that the compensation is being received and that it will continue for a three-year period, or be able to draw the conclusion that it will continue in the foreseeable future.
If the disability will not continue for a three-year period or the "foreseeable future," the underwriter may choose to consider the compensation to offset debt. Each case is distinct and should be considered on a case-by-case basis. The underwriter's decision should be documented in the remarks section of the loan analysis form. Specifics concerning disability income can be found in Chapter 4 of the VA Lender's Handbook.
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Can a Veteran purchase a home that is more than 50 miles away from his place of employment and commute?
Yes, as long as the Veteran can commute to his primary residence, a VA loan can be used. If the Veteran is going to be making an unusually long commute, the underwriter should consider commute expenses in the loan analysis. It is the responsibility of the underwriter to determine the "normal" commute distance in the area.
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Can the income of a spouse who is not a US citizen be considered? If so, does the VA require documentation that the spouse has a green card?
The income of a spouse who is not a US citizen may be considered if s/he is on the loan application.
The VA does not require any documentation that the spouse has a green card. Lenders should check with investors to verify secondary mortgage market requirements.
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How long does child support have to continue in order to be considered as income?
Verify the income if the applicant wants it to be considered. The payments must be likely to continue in order to include them in effective income.
Factors used to determine whether the payments will continue include, but are not limited to:
- whether the payments are received pursuant to a written agreement or court decree,
- the length of time the payments have been received,
- the regularity of receipt, and
- the availability of procedures to compel payment.
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