We’re all still feeling the effects to some degree of the housing debacle that began toward the latter part of the 2000s. For the VA however, VA mortgage played absolutely no part in the mortgage mess. VA loans didn’t play the “NINJA” game. Remember the NINJA loan? NO income, NO job and NO assets. Borrowers could be approved for a loan without having to prove hardly anything. After the storm had passed however, new rules were put into place that effectively eliminated loans where borrowers could simply “state” how much money they made without lenders having to verify it. Yet still today, there can be income that the VA lender can’t use, even though the borrower brings it home each month.
This so-called “invisible” income exists alright but the lender can’t use it because the funds can’t properly be sourced. The lender needs to verify, through a third party, where the funds came from. This is common for someone like a waiter or a bartender who makes most of their money through tips. At the end of each shift the waiter will count out their tip tray and take the money home. Sometimes those tips are deposited in the bank and sometimes they’re not. Even if a borrower provides bank statements showing multiple, irregular deposits there is no way to independently verify where the money came from. That might not be fair but lenders are required to verify the source of funds. A pay check stub and W2 confirms income but random deposits will be difficult, if not impossible, to use.
Tip funds and other irregular deposits need to not only be sourced but to have a consistent track record as well as the lender making an in-house determination that the sourced funds will continue in the future. If you or someone you know are depending upon tip income or any other occasional income, take care to document the income on a regular basis. It’s a shame to work so hard to qualify for a mortgage only to find out the additional income can’t be used.