Using Part-Time Income On a VA Mortgage Application
The U.S. economy lost more than 7 million full-time jobs in last decade’s recession. Since then, all of those jobs (and then some) have been recovered.
Part-time employment has increased, too, and many of today’s part-time workers have military backgrounds with VA mortgage eligibility.
These veterans who work part-time — like other employed persons — often seek to stop renting and start buying.
And, although qualifying for a VA home loan with part-time income is sometimes a bit trickier than getting VA-approved with a full-time income, it can certainly be done.
Generally, when you’re applying for a loan with part-time income, lenders want to be sure that your income is reliable enough to ensure consistent and continued mortgage payments.
Mortgage guidelines vary slightly from lender to lender, which is why you should re-apply if you're denied. However, among different banks, certain themes emerge.
Here are a few key things to know when buying a home with a part-time income.Verify your VA loan eligibility (Nov 27th, 2020)
VA Loans Require A Solid, Part-Time History
When you’re applying for a VA mortgage and using part-time income to qualify, the most important thing is that your income appears “reliable”.
You can make your income appear reliable in a number of ways.
First, you’ll want to provide evidence of two years of employment. Some lenders will look for two years of part-time work with the same company, but others won’t care if your employment is spread across many employers — especially if you’ve lived in different cities.
If you don’t have a two-year work history, that’s okay. You may be able to offset a shorter income history with strong compensating factors, such as a low debt-to-income ratio or strong financial reserves.
You may also opt to make a downpayment on your VA loan, as more and more military borrowers have elected to do.
Second, you’ll want to show stability in the number of hours worked per pay period.
For example, if one paycheck shows that you worked 30 hours over a two-week period, and the next paycheck shows you worked 60 hours, your lender may have a hard time trying to predict your future income.
In general, lenders prefer to see a consistent 45-hour pay period as compared to hours which are all over the board.
Just remember that with VA loans, VA-approved lenders will look at your full financial picture rather than just a checklist; it’s among the reasons why VA loans are unique.
Policies and guidelines can vary by lender.Verify your VA loan eligibility (Nov 27th, 2020)
Making All Of Your Part-Time Income “Count”
When it comes time to pay your annual federal income tax bill, income is income is income. If you earn monies, there are taxes that are due on it.
But mortgage lenders don’t see it that way. Just because you earn income doesn’t mean you can use that income to help get your VA loan approved.
In order to use part-time income on a loan application, mortgage lender want to feel confident that the income will continue for a reasonable period of time into the future.
If the income can be verified and appears to be stable, it can be used.
This position that lenders take can be frustrating to borrowers who take second or part-time jobs to help fulfill their dream of homeownership.
Furthermore, the same rules apply to overtime, commission, and self-employment income.
Without history and evidence of continuance, it’s unlikely that your lender will allow the income to be used on a mortgage loan application.
The best way to know whether your part-time income can be used to get approved for a VA loan, then, is to check with your lender. And, if you get an answer you don’t like, consider contacting a second (or third) mortgage lender.
VA loan guidelines vary from bank to bank.
What Are Today’s Mortgage Rates?
VA mortgages remain popular among military borrowers for their low interest rates and flexible underwriting standards. For borrowers with part-time income, VA loans can be especially attractive.Verify your VA loan eligibility (Nov 27th, 2020)