Verifying your employment is an important step in establishing eligibility for a VA home loan. However, changing jobs, being placed on temporary leave, or switching careers can all impact the timeline of your VA loan.
Prospective borrowers with a job gap longer than 30 days will typically need to provide a letter of explanation describing the employment gap.
At Veterans United, our broad approach to gaps in employment is based in part on the duration of your job gap:
Remember, too, that these are broad baselines and not set-in-stone rules.
It’s also critically important to understand that it’s not just a matter of finding new employment and being back to work for a certain number of months. The kind of job you take, how it relates to your previous work experience or education, and how you get paid can all affect whether a lender will ultimately consider your income stable, reliable, and likely to continue.
For example, let’s say it took you two months to find a job after separating from the military. From a job gap perspective, that might not pose a problem.
But if that job is in a completely different career field from your MOS, or if most of your pay comes from commission, lenders are going to put on the brakes.
Lenders may have additional requirements for prospective borrowers who are on temporary leave from work during the loan process. Policies can vary among lenders.
At Veterans United, we consider any leave shorter than six months to be temporary, as long as it’s not actually a job change.
When we verify your employment situation, if your employer indicates you’re on temporary leave, we’ll look at your return date when evaluating your income:
We would also need written confirmation of your intent to return to work and your anticipated return date. Your employer would also need to confirm in writing that you can return to work at a comparable position and pay rate.
Changing jobs during your loan process or right after your closing can present challenges. Lenders want to make sure you’ll continue to have a stable, reliable income that’s likely to continue.
They’ll often want to ensure there’s continuity between the old job and the new one.
If you’re jumping to an entirely new career field, that’s likely to put your homebuying journey on hold. Even a promotion could be problematic if some or all of your future income switches to a commission basis.
These situations are always evaluated on a case-by-case basis.
If you’re starting a new job after your loan closing, lenders will also need to take a more in-depth look.
At Veterans United, we would typically need to approve you based on the lessor of the two incomes. However, borrowers with sufficient assets may be able to count the higher future income. Also, there can’t be any contingencies regarding your future job.
If there’s a gap between your current job and the start of your future job, we could move forward as long as the gap is less than 60 days, and you have sufficient cash reserves on hand.
In this case, you would need one month’s worth of mortgage payments in reserve for a gap up to 30 days and two months’ of reserves for a gap between 30 and 60 days.
Lenders will confirm your employment situation on or just before your closing day. Talk with your loan officer about any pending changes to your employment as you move through the loan process.
VA loans allow Veterans to have a co-borrower on the loan. Here we break down co-borrower requirements and provide common scenarios around co-borrowing and joint VA loans.
Your Certificate of Eligibility (COE) verifies you meet the military service requirements for a VA loan. However, not everyone knows there are multiple ways to obtain your COE – some easier than others.