Verifying a prospective homebuyer’s employment is one of the key steps of the loan process.
VA lenders need to ensure a borrower has a steady, reliable income stream that’s likely to continue and that covers their future housing needs. For veterans, military spouses and others, lenders will send a Verification of Employment (VOE), an official VA document, to past and current employers.
The process is a bit different for prospective homebuyers still actively serving in the military, but now is a great time to get the ball rolling on your VA loan.
Lenders will require a Leave and Earnings Statement (LES) instead of a VOE for active service members. It contains the same basic financial information. Active duty members can acquire their LES online by using the MyPay portal at https://mypay.dfas.mil/mypay.aspx.
Base pay counts as stable and reliable as long as the service member isn’t within a year of release from active duty. Lenders can also include as effective income a service member’s Basic Allowance for Housing and occasionally other military allowances — clothing, flight pay, combat pay and others — provided they’re verified and expected to continue.
Service members within a year of their release from active duty or the conclusion of their contract term can present a unique challenge.
If their discharge date falls within 12 months of the anticipated date of their loan closing, the lender has to take a few extra steps to satisfy the VA. It makes sense, considering there may be uncertainty regarding the type of job and income that awaits the recently discharged veteran.
Given those potential question marks, lenders typically have to document at least one of the following four elements, if not more:
• That the service member has already re-upped or otherwise extended active duty service beyond that 12-month window, or
• The service member has a legitimate job offer in the civilian world (information about earnings and other standard data has to be included), or
• Significant underwriting factors that compensate for uncertainty, such as a down payment of at least 10 percent or noteworthy cash reserves, or
• A written statement from the service member declaring his or her intent to reenlist or extend service, along with
• A written statement from a commanding officer confirming the member’s eligibility to reenlist or extend service and that it’s likely to go through
Military borrowers interested in learning how to utilize their VA home loan benefits can talk to a loan specialist anytime at 855-870-8845. We’re staffed 24/7 to better serve service members abroad.
Photo courtesy of USACEpublicaffairs.