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ETS and VA Loans Guide

For active duty military, the decision to re-enlist or separate from the service is colored by a host of important factors. Service members may decide to continue their service, return to the civilian world or retire from work altogether.

Woman hangs American flag outside of her home.

Your Expiration Term of Service (ETS) date is also a key milestone when it comes to your VA loan benefit. Whether you already own a home or are looking to buy, choosing to re-enlist or separate can bring opportunities and challenges. It’s important to understand how your decision can impact your VA loan options.

Getting a VA Loan Within 12 Months of ETS

When you're within 12 months of ETS, VA lenders are generally thinking about two potential outcomes: you're re-enlisting or you're leaving the military.

Re-enlisting service members can have a more streamlined path to using or reusing their VA home loan benefit because there’s certainty regarding income and employment. Choosing to re-up means lenders can easily document your earnings and be confident that your income is stable and likely to continue.

Service members who plan to re-enlist may need to provide lenders with:

  • Documentation that you’ve already re-enlisted or extended your period of active duty beyond that 12-month period following the projected loan closing.
  • A statement that you intend to re-enlist or extend the period of active duty, along with a statement from your commanding officer confirming you’re eligible to do this. The CO must also make clear that there’s no reason to believe your re-enlistment or extension won’t be granted.

The bottom line is loan officers will want to see something official they can trust. The specific requirements may vary depending on the lender.

PCSing with a VA Loan

Whether you’re re-enlisting and PCSing, or separating and relocating, it’s possible to keep and rent out your current home and buy again, often with little to nothing down.

Generally, you shouldn’t expect to count the projected income from your new rental property toward your next mortgage. You’ll usually need a two-year history of receiving that kind of income to be able to count it. But you may be able to essentially cancel out that monthly expense and qualify with just the new mortgage payment if you can get a renter locked into a lease.

If owning an investment property doesn’t sound like a good fit, service members can also look to sell their current home, repay the original VA loan in full, and then fully restore their entitlement for a new purchase.

Buying a Home While Transitioning Out of the Military

If you're a service member planning to separate and return to the civilian world, lenders will want to know how you'll be able to make your mortgage payment.

Ideally, you have a civilian job lined up and ready to go. In that case, you'll likely need to show the lender a valid job offer letter or another statement from the soon-to-be employer detailing your new job, salary and other elements. If the lender feels there is enough continuity between your Military Occupational Speciality (MOS) or previous work/education prior to enlistment and your new job, you may meet the VA loan employment requirements.

With that in mind, it's essential to know that your lender may not count income types that are less than two years old. This could include income from a new full-time job or a part-time position that you’ve had for less than two years.

Lenders may also be more hesitant to count several types of employment as effective income, including:

Finally, there are also some forms of income that VA lenders will rarely count as steady or continuous, such as performance bonuses, lottery winnings and unemployment compensation.

Using GI Bill Income

Many service members aren’t heading straight into a new job from the military. Some may want to utilize their GI Bill benefits to take college classes. Others will hope to find employment after they've separated. These types of job gaps can pose challenges to your VA loan eligibility.

Unfortunately, due to its short-term nature, you cannot use GI Bill income to qualify for a VA loan. In these situations, prospective borrowers may not have a stable source of income once their period of military service comes to a close. That will make it tough to obtain a VA loan for those hoping to purchase within 12 months of their military release.

VA Loan After Retirement

If you plan to retire from the military and working life altogether, your job prospects aren't in play. Instead, it's a matter of your retirement income streams and what you can qualify for based on them. You might also be able to close on your home before your first retirement payment, depending on the documentation you can provide and the lender.

Every service member’s ETS situation is different. Talk with your Veterans United loan team to learn more about how your ETS can affect your VA home loan benefit.

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