Chris is an award-winning former journalist with 15 years of experience in the mortgage industry. A national expert in VA lending and author of “The Book on VA Loans,” Chris has been featured in The New York Times, the Wall Street Journal and more.
Updated on December 16, 2022 Veterans: Reuse your VA Loan benefit today Expert Reviewed At a GlanceVeterans and service members can look to qualify for a VA home loan using retirement income, which is great news for many homebuyers. You will need to be able to verify this income in order to qualify for the home loan.
Retirement is an exciting time, marking the beginning of a new chapter in life. For Veteran homebuyers, using retirement income is one way to qualify for a VA loan.
VA loans offer unique benefits such as no down payment and no private mortgage insurance, making them an attractive option for many Veterans.
In this article, we will explore the ins and outs of using retirement income to qualify for a VA loan and discuss the factors to consider when deciding if a VA loan is the right option for you.
Yes, you can absolutely still use the VA loan benefit if you are retired, as long as you meet VA service requirements. Additionally, you’ll need to meet your lender’s credit and income requirements.
Military members preparing to retire from service may be able to count their pending retirement income toward loan qualification, even before their retirement fully takes effect.
At Veterans United, we typically need to have your official start date and exact retirement pay in writing. Lenders may be able to verify the rate of pay with a signed statement from the service member’s commanding officer or through a Defense Department retirement income calculator. You would qualify based on the lesser of either your current full-time income or your retirement income.
In addition, you may need cash reserves available depending on the length of time between your last full-time paycheck and your first retirement payment. Lenders may have a limit for how many days they’ll allow counting pending retirement income.
The above is generally true for Veterans who are retiring from their civilian careers. All in all, the core of income verification is about assessing your risk as a borrower and making sure you are in a place where you can take on monthly mortgage payments.
Lenders can count it toward mortgage qualification if you’re already receiving retirement income. Remember, guidelines and requirements can vary by lender.
Generally, at Veterans United, we’ll typically need to:
Veterans can look to utilize retirement income from an employer and Social Security and Social Security Disability Insurance income.
Utilizing your retirement savings isn’t the only way to finance a VA loan after retirement. Note that VA loan income guidelines are discretionary, and evaluated on a case-by-case basis. The key thing being evaluated with income is that it’s consistent and verifiable. Beyond using your pension or savings, there are a variety of income streams to pull from:
Some Veterans are eligible to receive disability pay for service-connected disabilities. The VA recognizes disability pay as a verifiable income source that you can use towards a VA loan.
Consistent, part-time income can count towards your overall monthly income even if you are retired.
Income earned through renting out a room or owning and renting out a property is verifiable income according to the VA.
If you have a child or other person living with you long term, you may also count their income as part of your household income.
Another way retirement funds can come into play is if you need to make a down payment or come up with cash reserves. This is a $0 down loan program in most cases, but there are times when either or both of these could be needed for a VA loan.
Generally, if you’re entitled to a pension but still working, lenders may need to verify that you can access the money before your retirement. Many pension plans are only accessible when the person retires, quits their job, or dies.
Buyers can more easily extract money from 401k-type plans, although there may be financial penalties for making an early withdrawal. Borrowers who tap into retirement income for a down payment will need to document the deposit.
Again, remember that guidelines and policies on using retirement income can vary by lender. A Veterans United VA Loan Expert can review your situation at 855-259-6455 to help determine the best path toward homeownership.
See What You Qualify ForAnswer a few questions below to speak with a specialist about what your military service has earned you.
Chris Birk is the author of “The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.” An award-winning former journalist, Chris writes about mortgages and homebuying for a host of sites and publications. His analysis and articles have appeared at The New York Times, the Wall Street Journal, USA Today, ABC News, CBS News, Military.com and more. More than 300,000 people follow VA Loans Insider, his interactive VA loan community on Facebook.
About Our Editorial Process
Veterans United is recognized as the leading VA lender in the nation, unmatched in our specialization and expertise in VA loans. Our strict adherence to accuracy and the highest editorial standards guarantees our information is based on thoroughly vetted, unbiased research. Committed to excellence, we offer guidance to our nation's Veterans, ensuring their homebuying experience is informed, seamless and secured with integrity.
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