This article will explain how VA underwriters determine VA borrower’s income to qualify for a VA home loan in California. There are many different ways veterans applying for VA home loans earn income through their employment. They can be paid hourly, salary, 1099 and be self-employed. Below I will explain how each type of income is analyzed by the VA underwriter.
- Salary: Salaried borrowers are the simplest form of income to calculate. VA loan underwriters will go off the income from the borrowers latest paycheck stub. This will have to be supported though two years of tax returns and W-2’s. But it a borrower got a recent raise, this can be counted towards their qualification.
- Bonus income: Many salaried borrowers receive an annual bonus. If a salaried borrower receives bonus income, the last two years of bonus income will be averaged. If the veteran has just one year of bonus income, that cannot be counted towards qualification.
- Hourly income: Veterans who are paid hourly many times will have their income averaged over the last 12-24 months. If their hours are decreasing and their income is decreasing, a more recent average will be taken. Overtime pay is usually averaged over 12 months.
- 1099 income: Veterans who are independent contractors often receive their pay via 1099. In this case the veteran will need to supply two years of tax returns and their NET income (after write-offs) will be averaged. The veteran must have two years of receiving 1099 income. If they only have one year they cannot be approved. If the veteran’s income is declining, often only the latest year is used and an average is not used.
- Self-employed income: Veterans who are self-employed and claim their income on a schedule C or are a corporation will have their income calculated in a similar fashion as veterans who are paid via 1099. Two years of tax returns will be required and NET income (after all write-offs) will be averaged over two years.
- 2106 non-reimbursed expenses: Borrowers that are salaried or paid hourly may have work expenses that they write off via the 2106 form on their tax returns. If this is the case, their 2106 expenses over the last two years will be averaged and deducted from their incomes for VA loan qualification