Technically, the only income we can use for qualifying purposes on a VA Loan is the income of the Veteran and the Veteran’s spouse. There is one caveat to this if the Veteran needs to use non-spouse income to qualify.

Say the Veteran is engaged, and needs to use the income of his fiancee to qualify for his desired purchase price, as long as they can muster up a 12.5% down payment – we can count the fiancee’s income for the loan.

One of the biggest benefits of a VA Loan is the Veteran is not required to pay a down payment. The banks are okay with this since they receive a guarantee from the VA that if the Veteran defaults, VA will reimburse the bank up to 25% of the loan amount to recover any losses in the result of a foreclosure/short sale.

Each eligible Veteran is granted an entitlement from the VA, that in essence, correlates to the guarantee amount of 25% of max loan limit in that particular county. So if income from a non-spouse is used for the loan, the VA basically says – “we can vouch for the Veteran, but not the non-Veteran” and only a 12.5% guarantee is given to the bank. The other 12.5% guarantee would have to be covered by the borrowers in the form of the down payment.

The key to this is the non-spouse has to be someone planning to live in the property, so if the Veteran plans to use the income of say a parent, child or sibling – they must have the intention to live in the subject property.