# Presentation: 246323

## MILITARY

- INCOME

## Verification

- Leave and Earnings Statement (LES)
- Instead of Verification of Employment (VOE)
- Contains identifying information, rate of pay, date of entry, date of release, etc.
- Original or certified true copy
- Computer generated through “myPay” acceptable

## Important!

- Is the borrower within 12 months of separation?
- Check ETS “Expiration of Term of Service”
- Located on LES
- National Guard/Reserve member expiration on current contract
- Income with less than 12 months remaining term _cannot be considered stable and reliable._

## Less than 12 months remaining?

- Document the loan package with _one_ of the following four items:

- 1.  Evidence of re-enlistment or extension showing
- New ETS date more than 12 months from date of closing

## Less than 12 months remaining?

- Must include
- Start date
- Rate of pay
- Full time/part time?

## Less than 12 months remaining?

- Statement from commanding officer confirming
- Service member’s eligibility to reenlist and
- Belief that reenlistment request will be granted

## Less than 12 months remaining?

- Down payment 10% or more,
- Large cash reserves, or
- Evidence of strong ties to community AND
- Nonmilitary spouse with high income
- Only minimal income needed from veteran to qualify

## Base Pay

- Considered stable and reliable if ETS is 12 months or more from date of closing.

- Shown in “Entitlements” section of LES.
- Allowances shown here as well.

- Note:  If the service member has an upcoming change in pay grade, duty station, deployment, etc., the new income will not be reflected on the LES.  A “statement of service” may be obtained to show new base pay and/or allowance amounts that may be used in loan qualification.

## Allowances*

**Basic Allowance for Housing (BAH)**
- Based on location, grade and dependency status
**Basic Allowance for Subsistence (BAS)**
- Offsets cost of meals for service member
**Clothing Allowance**
- Lump sum paid once a year (if entitled)
- Convert to monthly amount for Loan Analysis

- Common, usable income

***Non-Taxable**

## Cost of Living Allowance (COLA)

- Received by service members assigned to duty stations in high-cost locations.
- Taxable income*
- Usable if it will be received for at least 12 months
- Verify with orders

**Alaska and Hawaii are considered “overseas” for military purposes.  The COLA received in these states is *_*not*_* taxable.*

## Other Allowances

- Based on special duties (i.e.  Submarine Pay, Flight Pay, etc.)
- Based on deployment (i.e. Hazard Pay, Family Separation Allowance, etc.)
- Based on career status (i.e. Career Sea Pay, Career Flyer Pay, etc.)

## Other Allowances

- Many “other allowances” are subject to periodic review and testing.  Verify the duration of the allowance.

- If the term of the allowance cannot be determined, this source of income may still be used to offset debts of 10 to 24 months’ duration.

## Grossing up?

- _Non-taxable_ allowances may be grossed up.
- For calculating debt-to-income ratio _only_.
- Do not use in residual income calculation.
- Use industry standard for gross up percentage.

## Reduced Residual Guideline*

- <date/time>

**Residual income guideline may be reduced by 5%**
**Due to having access to military-based facilities **
**Commissary (groceries, sundry items, etc.)**
**Exchange (military department and drug store)**
**MRW (recreational facilities, youth activities, etc.)****	**

***Residual Income Tables located in Chapter 4, section 9e of** _[VA Lender’s Handbook](http://www.warms.vba.va.gov/pam26_7.html)__._

## Reservist & National Guard Income

- Drill pay may be used as effective income
- If length of total service indicates strong possibility that this income will continue.
- Otherwise, this income may be used to offset obligations of 10 – 24 months’ duration.

## National Guard/Reservist “Activation Statement”

- Is borrower a National Guard or Reserve member?

- Have they received orders for mobilization?

**You need to know!**

## National Guard/Reservist “Activation Statement”

- <date/time>

- Obtain certification for _all_ borrowers using their income to qualify.
- _Including_ spouse
- Not required for active duty borrowers
- Make part of origination package. (See _[samples](http://www.homeloans.va.gov/lenderssampdocs.htm)__)_

## Underwriting Considerations

- Income may change significantly upon activation.
- Reduced income may prevent the borrower from qualifying.
- Increased income may not continue beyond a 12-month period.
- If activation status changes at any time between loan application and loan closing, underwriter must re-evaluate income used for qualification.

## References

- <date/time>

- _[VA Lender’s Handbook](http://www.warms.vba.va.gov/pam26_7.html)_
- Chapter 4, sections k - m

- _[Military.com](http://www.military.com/benefits/military-pay)_
- Military Pay and Allowances Pages

## Questions?

- <date/time>

- With base pay and 70 types of special pays and allowances, qualification questions may arise.
- Please do not hesitate to call or e-mail your nearest _[VA Regional Loan Center](http://www.homeloans.va.gov/contact.htm)__ for assistance._

- We would be happy to help!

## Thank you for your interest in the VA Home Loan Program!

- We appreciate your support!