This BLOG On VA Employment History Guidelines To Qualify For VA Loans Was UPDATED On April 15th, 2024.
VA Loans is the best loan program in the U.S. Unfortunately, not everyone can qualify for VA Home Loans. To be eligible for VA Loans, borrowers need to be either an active member of the U.S. Military and/or a Veteran of one of our Armed Services with a Certificate Of Eligibility (COE). VA Employment History Guidelines To Qualify For VA Home Loans are similar to other loan programs. One of the mandatory requirements to qualify for a residential mortgage loan, whether it is VA, USDA, FHA or Conventional, mortgage lenders require a 2 year employment history.
- However, VA, USDA, HUD and Conventional mortgage guidelines do not require that borrowers have been continuously employed by the same employer for the past 2 years
- HUD, Fannie Mae, Freddie Mac, VA, USDA all require borrowers provide a 2 year employment history on mortgage application
- Under VA Employment History Guidelines, veteran home buyers can have gaps in employment
- Employment Gaps is allowed as well as multiple jobs in the past 2 years
- Many veteran borrowers are told by banks, credit unions, and mortgage bankers that they do not qualify for VA Loans because they have not had been employed for two years by the same employer
- This can be true for a bank, credit union, mortgage banker, or other mortgage lender who have their own criteria, called lender overlays
- Overlays are lending requirements that surpasses the minimum federal lending guidelines that is set by FHA, VA, USDA, Fannie Mae, and Freddie Mac
- Portfolio and non-conforming lenders can have their own set of rules and lending criteria called overlays for their borrowers
VA Employment History Guidelines Versus Overlays
In general borrowers needs to provide 2 year employment history. If borrowers has been unemployed for a period of time, the employment history prior to the mortgage applicant’s unemployment needs to be provided.
- Here is case scenario on veteran borrowers case scenario:
- If borrower has been unemployed for more than six months
- Found a new full time job after six or more months of unemployment
- Under VA Employment History Guidelines, veteran home buyers needs to be in his new full time job for at least six months in order to qualify for VA Home Loan
- If veteran home buyer has been unemployed for six or less months and has gotten a new full time job, then the buyer will qualify for VA Loan with no waiting period
- However, cannot close on VA Loan until 30 days of paycheck stubs have been provided to the mortgage lender
- Written offer employment letter is required
- Written Verification of employment stating that the mortgage applicant’s job stability will likely to continue for the next three years will be required
Here is a case scenario of 2-year employment history per VA Employment History Guidelines:
- Veteran Home Buyer gets a new job
- Has been on the job for at least six months
- But has been unemployed for one year prior to getting a full-time job
- Then 18 months of past employment history needs to be provided prior unemployment status
Overview of Employment History Requirements
The Department of Veterans Affairs (VA) does not directly provide loans but guarantees loans from private lenders. To secure this financing, veterans must meet specific employment history requirements designed to demonstrate income stability and reliability, which are crucial for managing ongoing mortgage payments.
Key Employment History Guidelines
Stable and Reliable Income:
- Two-Year Requirement: Lenders generally prefer seeing at least two years of consistent employment history. This shows that the borrower has a stable and reliable source of income. However, this is not a rigid rule, and exceptions may be granted depending on the overall robustness of the loan application.
- Employment Gaps: Short gaps in employment are not automatic disqualifiers. Lenders may accept explanations for these gaps, such as education or military service, provided the borrower has returned to steady employment.
Income from Various Employment Types:
- Salaried Employees: Regular salary from ongoing employment is viewed favorably because it suggests a stable future income.
- Self-Employment and Freelancing: Lenders generally ask for two years of tax returns to confirm income stability for self-employed or freelancers.
- Part-Time and Secondary Jobs: Income from part-time or secondary jobs can be included if it has been consistent for at least two years and is expected to continue.
- New Employment: If recently employed, a borrower might need to provide a job offer letter or recent pay stubs to prove the job’s stability and income reliability.
Verification Process:
Lenders will verify employment by requesting the most recent pay stubs, W-2 forms from the past two years, and tax returns if self-employed. Another way is through Direct Verification where employers may be contacted to confirm employment status and salary.
Why Do Lenders Have Overlays On Longevity On Job?
Mortgage lenders like to see job longevity. This because statistics prove that longevity on a job means job and income stability and security:
- Many lenders view job hoppers as unstable with regards to job security and income stability
- All lenders want to see that borrowers have been in the same job for at least the past two years
- But what they want to see and the real reality is different
- Again, HUD ( Parent of FHA ), VA, USDA, Fannie Mae, Freddie Mac do not require 2 years of employment history where borrowers need to be with the same employer
- All they require is 2-year employment history
- Employment gaps and multiple jobs are allowed
- Borrowers told that you do not qualify for VA Home Loan by a bank, credit union, or mortgage company because they do not have 2-year employment history from the same employer, find a different mortgage company with no overlays
Frequently Asked Questions (FAQs)
- What are the employment history requirements for a VA loan?
Generally, VA lenders look for at least two years of consistent employment history. However, this can differ based on the lender and particular situations. - Is it possible to qualify for a VA loan with frequent job changes?
Yes, frequent job changes do not automatically disqualify you, especially if you’ve stayed in the same field or industry. Lenders primarily want to see stability and the likelihood of continued employment. - What if I have gaps in my employment?
Gaps in employment can be acceptable, particularly if they are short and you can explain them. Lenders may require a letter of explanation for periods of unemployment. - Does my type of employment matter when applying for a VA loan?
While the type of employment does not generally affect eligibility, lenders look for reliable, consistent income. This can be from salaried positions, self-employment, commission-based jobs, or military benefits. - How do lenders verify my employment for a VA loan?
Lenders verify your employment by requesting recent pay stubs, W-2 forms, or tax returns. They may also directly contact your employer. - Can I use income from a new job to qualify for a VA loan?
Yes, income from a new job can be considered. Still, you should provide a job offer letter or recent pay stubs to prove the employment is stable and likely to continue. - What if I’m a seasonal or temporary worker?
Seasonal or temporary workers can qualify for a VA loan if they show two years of consistent seasonal employment or if their income is stable and likely to continue. - How is self-employment income treated for VA loan qualification?
To establish income stability, self-employed individuals must typically provide two years of tax returns. Lenders may also require a profit and loss statement for the current year. - What about part-time employment?
Part-time employment can be considered if you have held the part-time job for at least two years, and the income is expected to continue.
Conclusion:
Understanding and meeting the VA’s employment history requirements is critical for veterans and active service members seeking to leverage the benefits of VA loans. A stable and reliable income, evidenced through consistent employment or a clear pattern of income over two years, is key to approval.
Providing thorough documentation and explanations for those with less traditional employment paths can help demonstrate financial stability and readiness to manage a mortgage.
Veterans considering applying for a VA loan should prepare by organizing all relevant employment documentation and consulting with a VA-approved lender to review their employment history and any potential issues in their application. The Gustan Cho Team has no mortgage overlays on VA Loans. Veteran Borrowers who need to qualify for VA Loans with a direct lender with zero overlays on VA Home Loans, please contact us at Gustan Cho Associates at 800-900-8569 or text us for faster response. Or email us at gcho@gustancho.com.
