I get a lot of different questions about the VA Loan before and during the process. However, one of the most asked questions I receive is whether or not spousal income can be counted on the VA loan application; specifically for calculating the DTI, or debt to income ratio.
The first choice of many veterans is to add spousal income to their VA home loan application. Obviously with spousal income added it shows more earning power of the couple and therefor will look more attractive on the VA loan application. Taking it a step further, if the amount of debt is well within the VA requirements, it would make the choice of adding spousal income even more logical and attractive. Even VA loan rules specifically instruct lenders to:
Verify and treat the income of a spouse who will be contractually obligated on the loan the same as the veteran’s income.
So, the shorter answer to the question that is asked about spousal income and the VA loan is yes, spousal income can be added and counted in the VA loan application.
When Should I Leave Spousal Income Off of the VA Loan Application?
This isn’t the end of the question though. As I like to point out to make sure everything is covered and the question is fully understood, there are some situations where the borrower may want to leave spousal income off the VA loan application. One of the biggest reasons to leave that income off the VA loan application is if you are expecting a change in marital status.
The Equal Credit Opportunity Act actually has very specific rules telling lenders NOT to ask about spouse income UNLESS (this according to the VA Lender’s Handbook), one or more of the following situations apply:
- Spouse will be contractually liable.
- Applicant is relying on the spouse’s income to qualify.
- Applicant is relying on alimony, child support, or separate maintenance payments from the spouse or former spouse.
- Applicant resides in a community property State or the security is in such a State.
The VA Lender’s Handbook also adds that:
In community property States, information concerning a spouse may be requested and considered in the same manner as for the applicant, even if the spouse will not be contractually obligated on the loan.
Community Property States: states with laws that divide financial responsibilities for married couples evenly for all purchases and financial obligations made during the marriage.
In community property states the spousal income may in fact be required information on the VA loan application. That being said, only “verifyable” income needs to be included. The VA has a definition of “stable, reliable, and likely to continue” income is the only income that needs to be on the loan application. Other income coming from personal sales, hobbies, side jobs, etc will not have to be put on the application.
What About Other Income or Payments?
Things like alimony, child support and other certain “maintenance” payments will not need to be listed on the VA loan application. It is important to remember though that payments must be identified and verified during the application process in order to count towards the borrower’s debt-to-income ratio (DTI). So you can expect this process to take place.