VA loan lenders look for borrowers to have a steady, reliable income in order to prove they are likely to repay their mortgage. Two years is typically the minimum employment requirement for VA loans, but this is not always the case.
The following guide will help you better understand the standard VA loan employment requirements so you can determine whether a VA loan is right for you.
When VA lenders talk about verifying employment, they really just want to ensure that you have a stable income. This usually means showing at least two years of consistent full-time employment. However, even if you don’t meet this requirement, you may still be able to get approved for a VA loan.
Applicants with less than two years on the job may qualify based on factors like past employment, education and training. Stability is the most important factor, so your lender will want to evaluate whether your new job and income align with your previous experience.
If there is enough continuity between your current and previous employment, the lender may allow you to move forward with your VA loan application right away. Or, they may require you to have a minimum of 12 months in your new position before proceeding. This is usually the case when applicants have made a move to a completely different occupation or career field.
There is some flexibility in the requirements, but ultimately, the lender's goal is to verify that you have a steady income source that will allow you to consistently make your mortgage payments.
There was a time when gaps in employment were considered a red flag. However, there are plenty of legitimate reasons for job gaps, ranging from being laid off to taking time off to care for a sick loved one or raise your children. Since the COVID-19 pandemic, it’s even more common to have spaces in your employment history and this is no longer something to be overly concerned about.
If you have an employment gap, your lender will evaluate your situation to determine whether your job history and finances demonstrate an ability to keep up with future mortgage payments. A well-written letter of explanation that includes the reason for the job gap may also improve your chances of approval.
While policies vary from one lender to the next, the important thing to understand is that a gap in employment does not automatically disqualify you from VA loan eligibility. Sometimes it will have no impact at all. Other lenders may require at least six months of employment if your past job gap was six months or longer. Your VA loan processor will be able to explain their policy and how it applies to your situation.
If you’re just separating from service, you won’t meet the standard two-year VA employment requirements. In this case, your lender will want to know that you have a job lined up.
You’ll need to provide documentation from your new employer that includes your job description, location, and pay structure. Your lender will then consider whether your work history, education and MOS align with your civilian job. If they believe there is sufficient correlation, you may be able to get a VA loan before you start your first day on the job.
As part of the underwriting process, your lender will require verification of employment. This reaffirms that you have steady, reliable income and that your employment situation hasn’t changed between the time you applied and your upcoming closing date.
For VA loans, the verification may be either written or verbal. Either way, your lender will want to confirm the length of time you’ve been working for the employer, your position in the company, your current income and likelihood of your continued employment.
Often, a verbal verification of employment (VVOE) is sufficient, particularly if you have a single, consistent income stream. In this case, it’s usually done via a phone call between the lender and your employer.
It’s also important to note that changes in your employment during the application process can delay your closing or cause your application to be denied. If you’re expecting a job transition before your closing, be sure to let your lender know as far in advance as possible so they can help you avoid any delays.
If you’re an active-duty service member, your verification is a bit different. In this case, you’ll need to provide your lender with a Leave and Earnings Statement (LES). This document should contain all the financial information needed to verify your income.
In addition to verifying your employment, the lender will want to verify your income. This is typically done by providing common documents such as income tax returns, recent bank and retirement account statements, 1099 forms and your last two-year’s worth of W-2 statements. You may also be asked to provide your VA disability awards letter and/or Social Security awards letter.
Even if you don’t have two years of employment history, you could still qualify for a VA loan. The verification of employment and income process is simply a way for your lender to make sure you are financially able to repay your mortgage loan, so it's likely that they’ll offer some flexibility.
If you’re thinking about applying for a VA loan, it's important not to make assumptions about whether you might be eligible. Instead, you can start the process by checking your VA loan eligibility.