Written by Kristine Wylie,

Mortgage interest rates reached historic lows in early 2011, and they may be on the rise soon.  Now could be an opportune time to refinance with the VA Home Loan Guaranty Program.  But, what if your income is less now than what it was when you qualified for your current mortgage?  You may still be able to qualify as long as you are a good credit risk and your residual income meets VA underwriting guidelines of 41%. 

Layoffs and pay cuts are common in a recession.  And, many folks experienced these hurdles in the recent months when the economy took a dip.  If reduced income puts you at a debt-to-income ratio that is less than what you can afford, then additional income may be needed in order to refinance.    

The VA allows many different types of additional income when providing its home loan guarantee benefit.  These may all help raise residual income for VA loan qualifying:

• - Bonuses
• - Overtime
• - Part-time or second-job income
• - Self-employment
• - Expense accounts for travel
• - Notes receivable
• - Child support and alimony
• - Rental property income

In addition to residual income, VA underwriters consider debt-to-income ratio, credit histories and FICO scores to determine whether a VA loan applicant is a good credit risk. 

Funny as it may sound, it’s possible that if you have less income than before, you may not even qualify for your own mortgage. Without additional income, a VA refinance may not be possible at this time.  If this is the case, then sit tight and continue making the scheduled payments on your loan.  And, work on getting some additional income that may help you qualify in the near future while rates are still low.