Military Purchasing a Home With Less Than 12 Months to the ETS Date

Posted by Dietchi Thomas on Friday, November 3rd, 2017 at 11:45am.

Unlike paystubs on a civilian job, an enlisted service member’s paystub may show the expected end of the employment or career.  The military paystub, called a Leave & Earnings Statement (LES), states the Expiration of Term of Service.  For short, this separation date from active duty is commonly known as the ETS date.  When getting a VA loan, lenders really care about the ETS date on the LES.  So what’s the big deal?  Let’s check it out.

Why do Lenders Care About the ETS Date?ETS date less than a year for VA loans

Guidelines, Underwriters, and Lenders are always weighing risk when determining if a loan should be approved.  The higher the risk, the lower the chance of VA loan approval.  Therefore, when a lender sees that the employment term for the service member “may” end soon, that is considered a possible risk.  More specifically, VA lenders look for ETS dates that are less than 12 months after the closing date.  This period is the standard for VA loans.

So if the ETS date is within 12 months of the closing date, there is increased risk of foreclosure from job loss.  If the borrower does not obtain employment quickly after separating from service in the same line of work, paying the mortgage may be difficult.  Although, less than 12 months of employment remaining on the LES does not always mean the service member’s employment is ending.  There are a couple ways to close on a VA loan within 12 months of the ETS date.

What if Not Reenlisting in the Military?

Keep in mind that just because the LES says the term of service is expiring, it doesn’t guarantee active service is ending.  It is still highly possible that the service member is going to reenlist.  To reenlist means to voluntarily extend the employment for another period of years.  In order to prove this reenlistment, the VA borrower must provide one of the following:

  • Authorization form command to reenlist and borrowers signed intent, OR
  • Copy of the reenlistment papers

ETS Requirements for Military Officers

Military officers are treated differently because there is not an ETS date on an officer’s LES.  Instead, this section will state 888888 because officers are indefinite.  Therefore, there is a different requirement for officers.

Sample Language for Officers Not Resigning Commission Letter

 If the VA borrower is an officer in the military, then we would need a signed and dated letter stating that he/she will not be resigning their commission within 12 months of closing.  Here is a sample letter format when not resigning.

“This letter is to confirm that I will not be resigning my commission with the U.S. Army/Coast Guard/Navy/Marine Corps within 12 months of the closing date of my mortgage loan for the below property address.”

Solidifying a New Job Starting Before or After the ETS

When a VA borrower plans on reenlisting, then obviously it isn’t too difficult to complete the above.  But, where it gets potentially difficult is when the service member is not going to reenlist.  Getting a verified new source of income that will satisfy a lender is key.  But there are potential options!

Options for Getting VA Loan Within 12 Months of ETS

  • Start a job prior to end of active duty
  • Solidified future job with all conditions completed
  • Wait until after active duty & started new job

VA Loan Process for Active Duty Buyers

Start New Job Prior to Separation of Service

Believe it or not, it is possible to start a new employment position while still in the service.  If this is the case, then it is possible for a VA loan approval which could count that income.  It is key that the new employment within the same line of work to count the new income.  For instance, if the MOS (Military Occupational Specialty) is in computers, then a new job in the tech industry makes sense.  Although, the new income has begun, more than likely the lower of the current military income and the income from the new position would be used.

Employment Contract on New Job Prior to Separation from Service

Now, where it gets tricky is counting income on a future job that has not started yet.  There are multiple reasons this is tough, but it basically comes down to being sure the job will start as expected.  Even though some companies will offer employment well ahead of the separation of service, there are usually conditions.  Additionally these conditions may be tough to satisfy until closer to the employment start date.  Although, if the employee is able clear all employment conditions, then obtaining a VA loan may be possible.  Just like the job prior to separation from the military, the lower of the service pay and new income would be used.  Also, it is important for the new position to make sense and be within the same line of work.

How to Buy a Home After Receiving PCS Orders

Waiting for Separation of Service and Starting a New Job

So, what if neither of the above can happen?  If there is no other income that helps the borrower qualify, then the only other option may after separating from service.  If the service member obtains a new job after the military, then proving the income would be just like any other employment.  It is common to require up to a 30 day paystub to prove the income for the new job, but we may be able to make exceptions on this.

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