Are you a Veteran looking to buy a home with a VA loan? Exciting news! The Department of Veterans Affairs (VA) has released updated underwriting guidelines for unreimbursed business expenses, effective June 1, 2016. These changes make it easier for Veterans—especially those earning commission income—to qualify for a VA loan. Let’s break down what this means for you and how it can help you achieve your homeownership goals.
What Are the New VA Loan Underwriting Guidelines?
The VA has clarified its policy on unreimbursed business expenses (UBE) reported on IRS Form 2106. These expenses, often incurred by commissioned employees, were previously listed as debts on VA Form 26-6393 (Loan Analysis), reducing the borrower’s qualifying income. The updated guidelines align VA loan standards with industry practices, ensuring a fairer assessment of income for Veterans.
Here’s a summary of the clarified VA policy:
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For Borrowers with Commission Income Less Than 25% of Total Annual Employment Income:
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Unreimbursed business expenses reported on IRS Form 2106 are not deducted from your income for loan qualification.
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These expenses are also not added as a monthly liability.
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Tax returns are not required to document income sources or deductions.
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For Borrowers with Commission Income of 25% or More of Total Annual Employment Income:
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Unreimbursed business expenses must be deducted from gross commission income, regardless of how long the borrower has reported these expenses to the IRS.
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Why This Change Matters for Veterans
This update is a game-changer for Veterans applying for VA loans. Previously, all unreimbursed business expenses were subtracted from your income, lowering the amount you could qualify for. For example, if you earned $70,000 annually but had $15,000 in unreimbursed business expenses, lenders would reduce your qualifying income to $55,000. This could limit your loan amount or even prevent you from qualifying.
Under the new rules, if your commission income is less than 25% of your total income, those expenses no longer reduce your qualifying income. This means you can qualify for a larger loan amount, making homeownership more accessible.
How the New Guidelines Benefit You
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Increased Qualifying Income: By not deducting unreimbursed business expenses (for those with less than 25% commission income), your income calculation reflects your true earning potential.
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Simplified Documentation: No need to submit tax returns to verify income or deductions if your commission income is below 25%, streamlining the loan application process.
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More Veterans Can Qualify: These changes make VA loans more attainable for commissioned employees, such as salespeople or independent contractors, who often face higher unreimbursed expenses.
Ready to Apply for a VA Loan?
With these updated guidelines, now is a great time to explore your VA loan options. Whether you’re a first-time homebuyer or looking to refinance, the VA loan program offers benefits like no down payment, no private mortgage insurance (PMI), and competitive interest rates.
Have questions or want to see how much you qualify for? Our team is here to help! Call us at (877) 228-9069 or fill out our quick online form to get started. We’ll walk you through the process and ensure you take full advantage of these new VA loan guidelines.
Take the Next Step Toward Homeownership.
Don’t miss out on this opportunity to make your homeownership dreams a reality. The VA’s clarified underwriting guidelines for unreimbursed business expenses are designed to help more Veterans qualify for the home loans they deserve.
Contact us today to learn how these changes can work for you and start your journey to owning a home with a VA loan.
Ready to buy your dream home? Call (877) 228-9069 or complete our online form to speak with a VA loan expert now!
