Some VA-eligible borrowers are self-employed in addition to their military callings. If using self-employment income to qualify for a VA loan, military borrowers should know that lenders consider self-employment income to be a special circumstance and will be taking a closer look for underwriting.
Most VA lenders use some type of automated VA underwriting system, or computerized qualifying program, to “read” income and credit numbers. By plugging numbers into the program, underwriters can determine whether or not a borrower meets the VA and lender qualifying requirements.
Self-employment income is one of the types of income that requires manual underwriting. This means a computer system cannot generate all of the criteria in order for self-employment income to be considered. Therefore, self-employment income will need more consideration from a live person.
Manual underwriting can determine whether the self-employment situation meets the duration and ownership requirements needed for the earnings to be counted toward total income.
Self-employment income is counted if it is revenue generated by ownership position of more than 10 percent. Also, two years tax returns and financial statements are usually requested for underwriters to consider this type of income. Financial statements should be professionally prepared by an accountant or CPA. If the business is a corporation, then corporate returns are necessary.
A two year minimum self-employment history will likely be required from most VA-approved lenders. Substantial experience or specialized training in the same line of work for another company can shorten the two-year minimum requirement to one year. However, less than one year is generally not accepted regardless of experience or training.
To pre-qualify with military salary plus self-employment income, talk to an experienced VA loan professional.