In the last article, we began discussing income verification for non-military employment. Since there is a great deal of different types of employment that fall under that category, it has been split into two articles. We have established that the underwriter needs to obtain a VOE and a pay stub to verify employment. The VOE can be accessed using VA Form 26-8497, and a pay stub can be provided by the borrower and will generally need to be a hard copy. The VOE must be an original and not a copy. However, the lender has some discretion on whether a borrower’s income can be considered stable and reliable, and if the lender determines that a borrower’s income qualifies, there are some alternative documents that can be provided to satisfy the VA’s requirements.
If the lender determines that the borrower’s income is stable and reliable (2 years employment is not required to reach this conclusion), alternative documentation can come in the form of pay stubs that cover the most recent 30-day period, W-2 forms for the previous 2 years, and telephone verification of the applicant’s current employment. The usage of this alternative documentation is conditional on all three of these alternative documents being provided. If the employer is not willing to verify the employment of the applicant or the applicant is unable to furnish W-2s or pay stubs, standard documentation must be used. Pay stubs and W-2s must either be originals or copies certified by the lender to be true copies of the originals.
The Handbook lists more details on what can be submitted in lieu of a VOE if the lender determines that the borrower’s income is stable and reliable. Documentation can be submitted via fax and the internet if necessary. Fax and internet documentation must consist of the same information contained in a standard VOE, clear identification of the employer and source of information, and the name and telephone number of a person who can verify faxed information. As you can tell, the VA is serious about verification. Verification of income helps prevent most applicants falsifying information and most lenders from making bad loans. The responsibility for ensuring the authenticity of documents rests with the lender.
Most faxed documents will have “banner” information provided at the top of each page of the fax while internet documents will have a header and footer information that can identify it. When printed, the web page should have the URL and the date and time printed at the bottom. Emails will have headers that include a timestamp, the sender, and receiver. The lender is advised to carefully view each document that is received via fax or the internet to make sure that there are no errors such as incorrect area codes, unreadable names, or unreadable or inaccurate income.
The Handbook reminds the lender that income analysis is not an exact science; it is a very subjective process that relies heavily on contextual data. Because of this, the lender is advised to evaluate each loan on a case-by-case basis using their judgment, common sense, and flexibility when warranted. The ultimate goal is to determine the borrower’s income is both sufficient and reliable for the foreseeable future. The tools a lender can use to help determine this are the applicant’s past employment record, the applicant’s training, education, and qualifications, the type of employment the borrower is in, and the employer’s confirmation of continued employment.
While 2 years with the same employer is certainly a positive indicator, it in and of itself is not always sufficient to conclude that the borrower will have a certainty of continued employment. The two-year minimum is not required and even if met, should be accompanied with other information that can indicate whether the borrower will be able to meet the demands of the mortgage for the foreseeable future. While the VA loan program is certainly more locked-down and strict than conventional mortgages, it still does its best to offer the flexibility that veterans need in order to get approved for loans. After all, if most veterans can’t qualify for the loans, then what’s the point of the VA loan program? The VA does its best to help as many veterans qualify for loans as possible.