When qualifying for a Florida VA Loan, like with any type of loan program, your lender will use your gross income (before taxes) for qualifying. This is extremely important because some items such as BAH and disability pay are not taxed. For those items, lenders can “gross up” the income, meaning that for qualifying purposes, they can take 125% of the amount you receive.
The total income of all of the borrowers on the application is used to qualify. If there is a family member living in the home who is working, but is not on the application, their income is not used to qualify for the loan.
The total gross income is used to calculate a number called debt-to-income ratio (DTI). There are two DTI numbers, housing ratio and total ratio. The housing ratio is the percentage of your income that will be used to pay your new mortgage payment plus taxes, homeowner’s insurance, and HOA fees. The total ratio is the amount of your gross income used to pay all of your debts including the new house payment. Generally speaking, VA requires a 60% or lower ratio, but any ratio above 50% requires strong factors to offset what is considered a high DTI.
All borrowers (except on Florida VA IRRRL refinances) will need to provide the most recent 2 years W2s. In addition, most borrowers will have to provide the most recent 2 years tax returns.
Active Duty military will have to provide their most recent monthly LES. Gross earnings are used, and 125% of BAH and BAS will be used.
Although in most cases, you must have a 2 year employment history to qualify for a Florida VA Loan, recently discharged Vets can qualify with less than 2 years with a signed letter from their employer stating their standing with the company, probability of advancement, and likelihood of being laid off. However, if you are receiving variable income such as commissions, generally you will need a 2 year history, despite recent military discharge. The exception is if you are doing the exact same job that you were trained to do, or did, while you were active.
Any variable income will need a 2 year history as the lender needs to verify stability and consistency. In most cases, you will have to provide 2 years of tax returns. In some rare cases, if you had a salary or hourly job doing the exact same thing previously, the lender may make an exception and allow for only 1 year history, but under 1 year is not acceptable.
The amount of the fixed income will have to be verified through documentation such as an award letter for the most recent year. In addition, you will need to document continuance of the income for at least 3 years beyond the closing date.
Child support and alimony will have to be verified through a court-stamped copy of your divorce decree and separation agreement. You will have to verify that the income will continue at that level for at least the next 3 years.
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