How to Calculate the Income for a VA Loan

By Jamie Kim

The United States Department of Veterans Affairs (VA) administers the VA Home Loan Program, health benefits, pension benefits and disability benefits programs for U.S. veterans. The VA Home Loan Program provides private mortgage loans from federally-backed lenders to eligible veterans. By providing lenders with a VA Loan Guaranty, qualified veterans receive low-interest loans without making down payments. Participating lenders must comply with the terms of the VA Home Loan Program. To qualify for a VA Home Loan, veterans must submit a loan application with a participating lender and complete a Certificate of Eligibility. Banks review their applications and, based on their income and credit information, approve them for maximum loan amounts.

Apply for a VA Home Loan through a participating lender. You can visit the VA's website and follow its "Steps in Getting a VA Loan" guide. The VA does not limit the amount of an applicant's loan. However, under federal law, the VA cannot guarantee or assume a loan that is more than a participating bank will lend you, since the VA guarantees repayment of your loan to the participating bank if you default.

Complete a Certificate of Eligibility. Your lender will require you to submit a paper or electronic copy and will provide one for you to complete. Alternatively, you can find certificates online through the VA's website.

Obtain a preapproval loan certification from your lender. This is the amount that your bank will lend you. Your qualification amount will depend on your past credit history and your present income. Generally, if you can afford to place a down payment on your new home, your lender may offer a larger loan.

Provide your income-and-expenses statement to your lender. Your lender will ask you for a list of your everyday living expenses. Your statement includes your housing expenses, car payments, credit car payments, child support obligations, debt repayments and everyday living expenses. Your lender will ask you for a history of your income through pay stubs and income tax returns. Generally, you will need to show stable income for at least a year.

Include other stable nonwage income if you want to use it for qualification purposes. You are not required to provide child support payment income, but you have the discretion to use it to qualify for a larger loan. Typically, you will need to show a year of stable payments.

The VA loan qualification and underwriting process is technical and requires a firm understanding of loan underwriting and income verification procedures. You may be able to obtain a cursory understanding by reviewing Chapter 4, Credit Underwriting, of the "VA Lenders Handbook."

To participate in the VA Home Loan Program, lenders cannot charge you prepayment penalties if you repay your loan proceeds before the deadline.

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