Income received through the GI Bill, or for that matter any type of educational-related income, would not be considered stable income.
We receive inquiries about educational-related income all the time, and if this is the sort of income that can qualify you for a home loan through the VA. Unfortunately the answer is usually a little discouraging.
In applying to a lender for a home mortgage, they are looking for sources of income that can be relied on to continue into the future, income that is solid and stable.
Lenders are looking for three key factors when they receive an application for any type of loan. You could be applying for a conventional loan, an FHA loan or in this case, a VA loan and they still look for a reliable stable income, one that is ongoing will most likely be there in the future. This is not what veterans want to hear, especially those who just got out of the service.
Many returning veterans immediately enroll in college, wanting to succeed in civilian life. When you consider the GI Bill post 9/11 and the income it provides for education, plus income from a part-time job, handling a mortgage payment might seem realistic.
However a VA lender may not see it this way due to the following:
Because you are unlikely to be enrolled in school for a long period of time, educational assistance from the GI Bill will be of short duration. When you apply for a 30-year home mortgage, that income cannot be considered for the full term of this loan. Because they do not know what the future holds in terms of your income potential, this is naturally of concern to lenders.
However, this does not mean that you won’t qualify; you will just need to state other income sources that lenders consider more reliable than educational assistance. You may be able to get a co-signer or work full-time instead of part-time, taking a little longer to get your education. This is definitely doable as many people work during the day and attend classes in the evening.
What lenders and the VA specifically are looking for is a consistent and stable income when assessing an applicant for a VA loan. What would be considered an effective income for paying off a mortgage, would be your base pay, any housing allowance you have while on active duty, rental income, any retirement income, etc.
When someone is receiving income from self-employment it can be a bit of a challenge. But if your lender gives you the green light to go ahead and apply, knowing you’re a veteran, then just be ready with your tax returns from the past two years. They will want to verify that you have been regularly receiving this income.
If you have any doubts as to whether you would qualify for a VA loan with your current income, there is nothing gained by not pursuing this and everything to gain by going right to a VA lender in your area to find out what they would need to work with you. You may be in better shape than you think.