Questions about education income and qualifying for a VA home loan are among the most common we receive. I’ve found the answer is generally among the most disappointing to give.
Unfortunately, lenders do not view education income as stable, reliable and likely to continue. Those are three key characteristics they’ll look for no matter the loan type, whether it’s VA, FHA or conventional. That can be difficult to hear, especially for veterans who recently separated from the military. Many return to the civilian world and start taking college classes soon after. Between post-9/11 GI bill income and maybe a part-time job, a mortgage starts to look more and more doable.
But lenders don’t see the same picture.
The problem is GI Bill income is by its nature short term. You’re not likely to be in school for a huge chunk of time, at least within the larger picture of a 30-year mortgage. This income may also be subject to change, and that’s a particularly worrisome thought for lenders.
Now, this doesn’t mean veteran students are simply unable to qualify for a VA loan. But prospective borrowers in this situation would need additional sources of income in order to satisfy lenders. That could be through a co-borrower (remember, for VA loans the only acceptable one is a spouse or another veteran with VA loan entitlement) or a job.
So what are the VA and lenders looking for when it comes to income? Stability and consistency are key when it comes to income and VA loans. There are various forms of income that lenders can count as effective income toward a mortgage, including base pay and housing allowances during active service; retirement income; rental income; and more.
Self-employment income, as we’ve also written about before, can pose some unique challenges for military borrowers and lenders alike. But veterans can count this type of income as long as the lender gives the go-ahead. In many cases, they’ll want self-employed borrowers to have at least two years worth of tax returns before moving forward on a mortgage application.
When in doubt about your income status and how you might stack up, it’s often best to go straight to the source. Run your questions and concerns by a lender and see what might be possible. You can do that with Veterans United at 888-212-1958 or fill out this simple form.
Photo courtesy of jmurawski