As employment opportunities continue to increase, you may be tempted to look for a new job. However, if you are also looking to purchase a home with a VA loan, you may want to wait to change jobs unless you have no other choice. Since VA loans need certain income and employment information, you should avoid changing employment just before or during the VA home purchase process. Even if you have a VA pre-approval, any change in job status can have a major impact on the mortgage.
As an applicant for a VA loan, you will need to the name, address, phone number and dates of employers for the most recent two years. In addition, paystubs for the recent 30 days and W2s and/or 1099s for the most recent 2 years are needed. If you are self-employed, the most recent 2 years of income tax returns with all schedules will also need to be submitted.
The information that you submit to the lender will be verified. The VA underwriter will also analyze whether the income is stable and reliable by examining the entire employment record, training, education and qualifications for the position that is held. Employment that is less than 12 months is not considered stable and reliable. If a change of employment is a career advancement with the same or increase in salary within the same or related line of work, then there is usually no problem.
Most problems arise when a job change goes from a salary to self employment position, a contractor position or a commissioned position. This type of income cannot be predicted and may not be considered stable until it has continued for at least 2 years. Changing from a regular salaried position to one of these types of employment can actually have a major impact on the approval of a VA loan.
Another issue that is common is when active military personnel is planning to leave the military. As Active Military, the Leave and Earnings Statement (LES) is required and shows the date of expiration of the borrower’s current contract for active service. If this date falls within 12 months of the date that the VA loan will close, the borrower must show the lender that they have either reenlisted or extended their period of active duty beyond the 12 months. If the borrower plans to leave the military, he/she must have a valid offer of employment that shows the date employment will begin and the earnings. Even with a valid offer of employment, this still may not be sufficient to use that new income as qualifying. This is a tough situation to overcome, but a good lender should be able to review the exact scenario and give you the options available.
Employment and income are an important part of the VA loan process when making a VA home purchase. This is another reason why you must keep in contact with your VA lender to discuss any changes that may be occurring prior to them actually happening. This will help to avoid any problems that might be the result of an employment change. In most cases, it is better to wait until after the home is purchased and the mortgage has closed.
Have questions about income and employment? Feel free at any time to contact me for more information about a VA loan and how you can achieve a 100% VA purchase.
My loan process was very easy and quick. Not to mention a great loan rate. I couldn't be happier!
Capt Sam T. - US Army
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