j. Self-Employment Income (continued)

Analyze the general economic outlook for similar businesses to determine whether the business can be expected to generate sufficient income for the applicant’s future needs.

If the business shows a steady or significant decline in earnings over the period analyzed, the reasons for such decline must be analyzed to determine whether the trend is likely to continue or be reversed.

If the business is unusual and it is difficult to determine the probability of continued operation, obtain an opinion on viability and future earnings, and an explanation of the function and financial operations of the business from a qualified party.

Depreciation claimed as a deduction on the tax returns and financial statements of the business may be included in effective income.

k. Active Military Applicant’s Income

Verification

A military LES (Leave and Earnings Statement) is required instead of a VOE (VA Form 26-8497).

·   The LES must furnish the same information as a VOE.

·   The LES must be no more than 120 days old (180 days for new construction).

·   For loans closed automatically, the date of the LES must be within 120 days of the date the note is signed (180 days for new construction).

·   For prior approval loans, the date of the LES must be within 120 days of the date the application is received by VA (180 days for new construction).

The LES must be an original or a copy certified by the lender to be a true copy of the original.  Note: The Department of Defense provides service members access to a computer generated LES through the myPay (Formerly known as E/MSS - Employee Member Self Service).  This type of LES is acceptable.

In addition, identify service members who are within 12 months of release from active duty or end of contract term.  Find the date of expiration of the applicant’s current contract for active service on the LES (for an enlisted service member) or on an officer’s orders.  For a National Guard or Reserve member, find the expiration date of the applicant’s current contract.