Counting Military Income on a Mortgage

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Do you know what an “LES” is?  An LES documents an Active duty military personnel’s income.  Think of it as the military’s version of a pay-stub.  In fact, the civilian version of a pay-stub could learn a thing or two from the LES – quite possibly the most detailed pay-stub in the world!

A veteran’s LES breaks down base pay, allowance pay along with listing a few key dates.  The amount and type of LES income that counts toward a VA loan approval is subject to specific rules set by VA.  If missed, a veteran will be very unpleasantly surprised once an underwriter reviews their VA mortgage application.

Military Income That Counts on a VA Home Loan

A military pay-stub or contains a great deal of information.  For example:

  • Military LES: Base Pay
  • Military LES: Allowances

A Veteran’s LES contains potential hidden potential landmines.

Base Pay on a Military LES

An active military personnel’s pay-stub lists their base income.  A veteran’s active duty termination date or “ETS” is printed right on their LES.

While the ETS date is critical, often it is overlooked.  Typically, using a veteran’s base pay from an LES requires the ETS date be at least 12 months out from their home loan closing.  However, there are exceptions to the 12 months rule.

Even with an ETS date looming less than 12 months out, base pay may still be used.  If the veteran provides documentation showing they have re-enlisted or they plan on re-enlisting.  Furthermore, the veteran may provide an employment contact showing they have employment lined up after leaving the military.  As long as their new income and employment is consistent with their previous military work and pay.

Allowances on a Military LES

The military pays active military personnel for various allowances for things such as housing and food.  In fact, the military pays a COLA or Cost of Living Allowance.  The LES also breaks down the different Allowance income.

VA Allowances are also used as effective income.  The key – allowances must continue for 3+ years after the veteran’s VA home loan closes.  Your loan officer should thoroughly review income before issuing a pre-approval.  This avoids costly surprises for you later in the VA home loan process.

These tricks help veterans avoid unnecessary hurdles in the VA home loan process.

By Jeremy House

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