VA Income & Asset Required

Income Guidelines

In order to qualify for an VA loan, all income must be analyzed to ensure that it is sufficient to cover the mortgage and other obligation of the borrower. Also, the stability and likelihood of continuance must also be analyzed. Income from any source that cannot be verified, is not stable, or will not continue may not be used in calculating the borrower’s income ratios.

Debt Ratios

Debt Ratios are the relationship between ones income and ones expenses. The Ratio of Income to Expense is based on 41%. This is standard for VA ratios. The number 41%, represents the relationship between the borrower’s income and his new housing expense of principal, interest, taxes, insurance, hoa’s and all recurring monthly revolving and installment debt (car loans, personal loans, student loans, credit cards and etc.). A borrower who makes $3,000 per month who has a housing expense of $870 and a recurring monthly revolving debt of $360 would give you a total fixed payment to effective income of 41%.



With the use of automated approvals, a borrowers ratios can exceed the guidelines above. Also, with compensating factors a borrower may be able to exceed the ratio guidelines.

Stability of Income

HUD does impose an arbitrary minimum length of time a borrower must have held a position to be eligible. However, the lender must verify the borrower’s employment for the most recent two full years. If a borrower indicates he or she was in school or in the military during any of this time, the borrower must provide evidence supporting this such as college transcripts or discharge papers. The borrower must also explain any gaps in employment of a month or more.



Allowances for seasonal employment, such as is typical in the building trades, etc,. may be made.
The lender or underwriter is looking to show a steady source of constant earnings. Borrowers with frequent job changes generally show a lack of stability. Also, large swings or changes in income will also lead an underwriter to question the stability of the income. A borrower who changes jobs frequently within the same line of work, but continues to advance in income or benefits should be considered favorably.

Assets

Though VA doesn’t require assets in the bank to close on a loan, each mortgage consultant might have you put a cushion in the bank of at least 2 months of all your expenses with a minimum of 2 months of mortgage payments.