Significance of projected income in VA home loan approval?

Question

I want to buy my first house hack using my VA Loan benefits.  However, I also plan to get out of the Military and am not moving straight into a high paying job.  The goal is to close on the house 2-3 months before getting out and getting my last full paycheck.  I am very concerned that a lender won't approve the loan if they know I don't have a new job lined up.

How much does continuing income matter in getting a mortgage (specifically the VA loan)?  Currently, I have $0 in debt, an 825 credit score, make $80k a year and have $60k cash in the bank.  I would make an ideal candidate in any other situation...

If a mortgage lender won't approve the loan without having a job lined up, is my only option to get a job?  Does my cash savings count towards "income?"  I will be in the Reserves which will provide reliable, albeit low, income.

I don't intend to get a job because I plan to utilize the saved $60k as income while I hustle to make extra cash, get a small business off the ground, and focus all my efforts on the house hack. Six months after the first purchase the goal is to close on a BRRRR property with an all-cash investment... no time for a "real" job.

Kristi H. · Answer

@Lynn M. Yes, I will be leaving active duty in about 7 months.  Thank you for your response, it is a really helpful perspective.  And you are right, plenty of people start their own businesses while employed full time.  Also, having a steady salary could likely give me more freedom.

@Dylan H. Thank you for the follow-up, even though it isn't the answer I was hoping to hear!

@Chris Mason The document you posted was exactly the kind of thing I was looking for.  Thank you so much for the feedback!  Now I will just need to get the timing to align with getting an offer letter/contract, and closing happening around the same time.  That reference is AMAZING! I can't believe I didn't come across it sooner.  Thanks again!!

Account Closed Really appreciate your perspective, thank you so much!

Michael Kelly · Answer

They are going to be asking you about your work at the time of you trying to purchase so I don’t see why being in the transition process would effect you in getting your loan. Never had a lender question the future of my job security rather they would asking about current employment and then the last few months pay stubs etc. If I were you I would close on a house while you still have employment because you will be able to show a recent (within the last month) pay stub.

Chris Mason · Answer

You're going to get jammed up.

And, honestly, that guideline is perfectly reasonable. Regardless of what your recruiter told you, the private sector is not going to be throwing job offers at you just because your DD-214 says "honorable discharge," excluding minimum wage jobs that you probably don't want to do anyways.

My suggestion would be to go ahead and get that steady civilian sector income established first, or that small business that you mentioned, either way.

Dylan H. · Answer

@Kristi H. They will take all of your other assets/cash into consideration, but it's going to be hard to get approval during the transitioning process if you do not have another job lined up. I was hoping you hadn't started the resignation process yet because then the lender would not need to know or find out you were getting out.

Also, I wouldn't worry about getting the Statement of Service quite yet, some lenders may not require it so I would just wait until they ask you for it.

Lynn McGeein · Answer

When you say you plan to leave the military, does it mean soon?  If you have at least a year left, then you're likely fine.  If it's less than that, then in order to accomplish your house-hacking goals, it may mean having to get that job, at least for a little while, so you can prove the income is there.  It may mean starting slower than you want on your own business plans, but it would be well worth it as once you start receiving income from your home, you'll likely be much more secure moving forward on your own, so you should be  considering it part of your self-employment strategy.  There are many who work 40-hour weeks at a job plus 20-30 hours a week to initially start up a business.  There's definitely time for it unless you have other obligations that won't allow it.  Just don't mention your short-term plans to either your lender or your employer, and you should be fine.

Kristi H. · Answer

@Dylan H. My resignation is in routing and should have orders in hand around the time I hope to close.  I wasn't aware of the statement of service requirement but will certainly get that generated, thanks for the heads up.  I'll also have my DD214 and will be transferring to reserve duty.

My main concern is getting approved for the loan despite not having a reliable income 2-3 months after close.  Will the lender take all my other assets, and credit score into consideration?

Dylan H. · Answer

@Kristi H.

Do you already have your orders to get out? Does your command know? You’ll have to provide a Statement of Service when you apply for the VA loan most likely (my lender required it).