Using a VA Loan when Retiring from the Military
Those wanting to apply for a VA home loan when preparing to retire from the military have a unique situation compared to other house hunters.
VA lenders require proof of stable, reliable income to get a VA loan, which can cause issues for those within 12 months of their Expiration – Term of Service (ETS) date. Beyond income considerations, VA occupancy requirements typically require the homebuyer to take occupancy within 60 days of closing, which may pose an issue for some homebuyers.
It's entirely possible to get a VA loan when retiring from the military, but it's not always easy.
What can make this simpler is having a civilian job lined up. However, that's not always a guarantee because lenders want to know you'll thrive in your new position - meaning you're able to produce stable, reliable income for the foreseeable future. Because of this, lenders often want to see your new job line up with your military experience.
Additionally, lenders typically require an official offer letter from the employer that includes your future job title, job description, responsibilities, pay type (hourly, salary or commission), pay rate and employment status (part-time or full-time).
The other primary consideration is occupancy when buying a home within 12 months of your ETS date.
The VA typically requires homebuyers to occupy the home within 60 days following closing, which can be a problem if your retirement date is several months away.
If the homebuyer has a spouse that could move into the property within 60 days, that's typically sufficient. You may also meet the requirement if you're deployed overseas. In either case, lenders will consider your current living and travel expenses when determining eligibility and affordability.
Keep in mind the VA may accept a later move-in date, but generally, nothing longer than 12 months past the closing date of the VA loan is accepted. The VA is relatively strict about this, requiring Veterans to submit proof of a retirement date and written intent to take possession of the home in a specific date range.
When submitting in writing, the VA needs specific dates. Words like "soon" or "within a few months" won't cut it.
In addition to the required letter of explanation, the lenders typically require the borrower to show they can afford to maintain the costs of a current residence plus the VA mortgage payments between closing the loan and moving into the new home.
House hunting while transitioning out of the military isn't always easy, but each branch tries to help. You may be able to take paid leave or Permissive TDY (a non-paid leave that doesn't count against personal leave or vacation time) to go house hunting before retirement from the military.
The government provides these options because military careers often require service members to be out of the country or far from where they wish to plant roots. The military places a big emphasis on its members preparing for transition out of the military, and house hunting is an essential part of that preparation.
If you cannot take leave, you can rely on your spouse, significant other, friend or trusted real estate agent. However, don't rush it if you don't have to. Take your time and make sure the home is right for you.
Getting a VA loan within a year of retiring from the military is possible but may not be an easy road. If you're a prepared homebuyer, things can be a lot smoother.
If you're ready to take the first step towards homeownership, start by comparing the top VA lenders here.
