Some potential VA borrowers consider applying for a VA home loan as part of their military retirement planning--but is waiting for the day you “drop papers” in order to become a retiree from the Armed Forces a good idea?

Many say it depends on your financial needs and goals, but consider that VA loans require the lender to verify employment as part of the application. A borrower who is transitioning into a civilian career may or may not be able to find “stable and reliable” employment right away after leaving the military--and that can affect your VA loan application.

In some cases, a highly skilled veteran may not have trouble finding new work or starting a new career, but in others the borrower may do well to consider applying for a VA loan two or three years before retiring, or waiting until after he or she has started working in the private sector to apply.

A VA loan application filled out and submitted in “the twilight zone” of time between the last year of military service before retirement and the start of a new civilian career could have trouble being approved unless the borrower has what VA loan rules call “compensating factors” which can include a large down payment, “substantial cash reserves”, investment income or other forms of capital which can make the borrower a better credit risk.

Coming to the VA loan process in these cases with a solid credit history and at least one year of reliable, on-time payments with no delinquencies is also recommended by financial planners and home loan experts--consider the timing of your application carefully if you have had a delinquency in the past year on any credit line or home loan. Putting 12 months between your VA loan application and these late payments is strongly recommended.

Applying for a VA loan two or three years in advance of retirement from military service can help the borrower avoid the “stable and reliable income” problem--the lender will most likely look for income that can be verified to continue for two or three years and your retirement income beyond that time will likely help with mortgage payments and your debt to income ratio. But the closer you get to “the twilight zone” time between retirement and a new civilian career, the less your current income can help and the more the lender will look to your options post-military when trying to determine your ability to pay the monthly mortgage payment.