You don’t necessarily have to have a job to get a VA loan. if you are already in retirement, you may still qualify for a VA loan. It all comes down to proving that you can afford the loan. If you make money in retirement, you may qualify for the loan.
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What will differ the most is what you have to provide in order to qualify for the loan.
Qualifying With Retirement Income
The VA lender must verify that you have retirement income, that you receive it regularly, and that it will continue for the foreseeable future. That’s a lot to verify!
First, you need to provide proof of the treatment income. You can provide a letter from your commanding officer or your award letter. This will tell the lender how much income you make each month and the date that you should receive it. The letter should also state the length of time you are expected to receive the income. In order for it to qualify for VA financing, it must continue for at least three years.
Next, you must prove actual receipt of the income. This is where it gets tricky. You have to prove to the lender that you actually get the income every month. The easiest way to verify this is with your bank statements. If you can show the receipt of retirement income around the same time each month on your bank statements, it should suffice. The numbers must match exactly in order for it to count.
Finally, you must prove to the lender that the retirement income will continue for at least the next three years.
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Compensating Factors to Help Your Case
VA loans are flexible. They don’t have a lot of strict requirements. But some lenders may require compensating factors to help offset the risk of you being retired. The most common compensating factors include:
- Cash reserves – If you have money on hand, it helps a lender feel better about giving you the loan. If the lender knows that you can pay the mortgage even if your retirement income stopped, they will be more likely to approve you for the loan.
- Low debt ratio – Since you are retired, the hope is that you don’t have a lot of debt. You want to keep your total debt ratio lower than 43% and that includes the new mortgage. If you have many other debts, it can decrease your chances of getting the loan.
- High credit score – The VA doesn’t focus on credit scores, but lenders sometimes do, especially when they are dealing with a borrower in retirement. The higher your credit score is, the more likely you are to get approved because you show a lender that you are a good financial risk.
Even if you have other types of income in retirement, you may be able to use it for qualifying purposes. The VA is good about going on a case-by-case basis. For example, if you have rental income and you can prove that you have received it for the last 2 years; you may be able to use it for qualifying purposes. You may also use disability or even income from a relative living with you if you can prove that the relative will live with you for at least the next three years. The VA is flexible in its guidelines, helping veterans get the loan that they need.
