Military Reserves & VA Home Loans

Using Military Reserves IncomeAn Arizona VA mortgage is a great loan option for eligible and qualified military veterans but what about those that are currently in the military reserves?  Are they eligible for a VA mortgage when looking to purchase or refinance their Phoenix area home?

Good news, the answer is most definitely YES!  However, Vets in the Reserves heed this warning:  tread carefully!  A veteran who is currently in the Reserves must make sure their mortgage lender breaks down their income with a fine tooth comb.  Okay, that may be a bit extreme but income and LES dates must be carefully analyzed when a vet is in the Reserves.

Income From the Reserves Can be Used

A veteran who is serving our great Country in the Reserves can use the income they work so hard for to qualify for a new VA mortgage however they must meet a few basic criteria (explained below).  The challenge is this – a Reservist’s duty is typically outlined/defined in fixed terms meaning there is a specific ending date to it.  You guessed it, underwriters (even VA underwriters) do NOT like it when the income being used is slated to end too soon.  This is where a VA loan officer needs to scoop up their magnifying glass and take a good look at the veterans paycheck!  After-all,  with all the dedication America’s finest have put in on their end we owe it to them to help them use the money they work so hard to earn when looking to qualify for a new VA home loan.

It is all about the acronyms!  As long as the ETS date on the veterans LES is at least 12 months out from his/her projected closing date you are fine.  Confused?  Let’s translate this into non acronym English (although I am guessing all my military veterans are tracking just fine!)

Including Reserves Income on a VA Loan: It’s a Simple Process

Military pay-stubs are very structured, organized and they include a slew of useful data.  In fact, all the info needed to initially determine if a Reservist’s income can be used is right at the top!  The pay-stub (affectionately known as an “LES” which stands for Leave and Earnings Statement) has a section labeled “ETS.”  This section shows the veteran’s “Expiration/Term of Service date and is formatted in a dd/mm/yy format (example – May 15, 2014 reads 150514 in the ETS section on an LES).

As long as the veteran’s ETS date is at least 12 months away (going forward) from the date that they plan on closing on their Arizona VA home loan than the income may be used to help the veteran qualify.  For example if the veteran is looking to close on 05/15/2013 and their ETS date is at least 05/15/2014 the income can be used.

What if ETS is less than 12 months out?

The day the veteran that is currently working in the Reserves decides to buy a house may not comply with his/her ETS date.  For example, what if the Reservist only has 6 months between now and their ETS date?   In this case a VA mortgage lender (per VA guidelines) will want what is known as a “statement of service.”

The statement of service (written by the veteran’s commanding officer) will need to show that the veteran is re-enlisting AND that he/she is eligible to re-enlist.

There you have it!   A quick “how to” on including a Reservist’s income on a VA mortgage application.  If you have any questions please call or email us today.

By Jeremy House

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