This question came from a reader in Oklahoma. Her daughter and son-in-law graduate from college this year and have contracts to begin work in June. She wanted to know if they can close on a house before they graduate, but within 45 days of starting their new positions using her son in-law’s VA eligibility. I previously posted on this topic, but my article was limited to conventional and FHA loans. Here’s the scoop regarding VA loans:
Projected income is generally NOT allowable EXCEPT in the case of an active duty veteran within 12 months of release from active duty or end of contract term (This date is shown on the LES statement). The Lenders Handbook—VA Pamphlet 26-7 specifies what other requirements must be met in order to use future income to qualify for a VA loan:
If the date is within 12 months of the anticipated date that the loan will close, the loan package must also include one of the following items, or combinations of items, to be acceptable:
- documentation that the servicemember has already re-enlisted or extended his/her period of active duty to a date beyond the 12-month period following the projected closing of the loan, or
- verification of a valid offer of local civilian employment following the release from active duty. All data pertinent to sound underwriting procedures (date employment will begin, earnings, and so on) must be included, or
- a statement from the servicemember that he/she intends to reenlist or extend his/her period of active duty to a date beyond the 12 month period, plus
- a statement from the servicemember’s commanding officer confirming that:
- the servicemember is eligible to reenlist or extend his/her active duty as indicated, and
- the commanding officer has no reason to believe that such reenlistment or extension of active duty will not be granted, or
- documentation of other unusually strong positive underwriting factors, such as:
- a down payment of at least 10 percent,
- significant cash reserves, and
- clear evidence of strong ties to the community coupled with a nonmilitary spouse’s income so high that only minimal income from the active duty servicemember is needed to qualify.
Unfortunately, since the reader’s son-in-law had not been on active duty for the past three years, he and his wife will not be able to close on a VA loan before receiving at least one month of pay stubs from their new employers. I did suggest they talk to a realtor about negotiating a pre-closing occupancy so that they wouldn’t have to move twice when they relocate.
If you have any questions about your particular home purchase or refinance scenario, please feel free to contact me.