Can I use my future retirement income to qualify for a VA loan?
If you are planning to retire from the military, you may be able to use your future retirement income to qualify for your VA home loan. The lender will need to document that your future income will be sufficient to qualify for the loan amount you are seeking.
In order to use your future retirement pay, you must document a specific start date and a specific rate of pay. To do this, the lender will often request a letter on official letter head signed and dated by your commanding officer stating your approved retirement date and your monthly retirement amount.
Check out the ‘Field Report’ below to see how we qualified an Active Duty Lieutenant Colonel in the Air Force based on his future retirement income!
Active Duty Lieutenant Colonel in the Air Force applied for a purchase VA Loan. He had been turned down by another lender for unstable income because he was less than 12 months away from Expiration of Term of Service (ETS) and not yet receiving retirement income
The individual could not qualify based on his active duty pay and his planned retirement was not until 4 months later.
How We Overcame
We requested an official letter stating his retirement date and this amount of his monthly retirement, which was signed and dated by his Commander.
Benchmark was able to close the loan 95 days prior to his retirement income starting!
Ready to use your VA Home Loan benefit? Take the first step and Check you Eligibility with our free COE tool.
The veteran borrower previously lived in his owner-occupied property in Arizona, technically a departing residence, which he had been renting out for 18 months. He was currently renting while on active duty in Texas, when he received PCS Orders to Nebraska and decided to purchase a home there.
Rental income was needed in order to offset the mortgage payment (PITI) on the property in Arizona, so we could qualify for a mortgage on the property in Nebraska. He had a lease agreement on the property in Arizona, but we could no longer use it. We could have used that rental income to offset the payment of the PITI, If the borrower had departed the previous residence fewer than 12 months ago. In this scenario, he had been gone for 18 months, which means that a full tax cycle had passed. In order to use any of the rental income, we would need to claim it on the tax return, however, the borrower had not claimed the rental income on his 2017 tax return.
How We Overcame
We decided that the best solution to the problem was to have the borrower “amend” their 2017 tax return to claim the rental income. Remember that perception is reality. Although it may not have been fun to have this conversation with the veteran client, it was necessary to make the deal work. Veterans are resilient! What may have been a huge inconvenience to some, was viewed as his being spared the hardship of not being able to buy a home. Our veteran client was happy to comply, and promptly had his 2017 taxes amended.
Due to the borrower amending their 2017 tax returns, it now showed a $400 per month loss to the borrower’s income. Our underwriter had already verified that he would still be qualified for the loan (even with a loss of up to $750), so he was within tolerance. We approved the loan, and the veteran client was able to purchase his home. Finally, we closed on schedule, with all parties coming away happy and satisfied.
Benchmark brings you home.