Part-Time Income Mortgage Guidelines
Part-time income mortgage guidelines on FHA loans allow homebuyers with part-time jobs to be eligible for a mortgage loan. However, part-time income needs to be stable and needs to be seasoned for the past two years. Income in mortgage qualification is the most important factor in qualifying for a mortgage. Borrowers can have prior bad credit, collection accounts, charge-offs, bankruptcy, foreclosure, deed in lieu of foreclosure, short sales, low credit scores and still qualify for a mortgage. But cannot qualify for a mortgage if they cannot document income.
Part-Time Income & Mortgage Loan Approval
Income is kind of tricky when it comes to qualifying for a mortgage. There are certain ways mortgage underwriters qualify income for a mortgage loan applicant. Not all mortgage companies qualify income the same way. HUD, VA, Fannie Mae, and Freddie Mac have their own guidelines when it comes to qualifying income. Each mortgage lender can have its own set of guidelines when it comes to qualifying income. Yet, within a particular mortgage company, each individual mortgage underwriter may use the underwriter’s discretion in qualifying income for a particular loan applicant.
W-2 Income In Mortgage Qualification On Salary And Hourly
Salary and hourly income wage earners are the easiest and quickest way to qualify when it comes to qualifying for income for mortgage qualification. The easiest borrower to qualify when it comes to income for mortgage qualification is when a mortgage loan applicant makes a certain amount an hour and/or salary. Hourly wage earners who work 40 hours per week and have been in their current job for 2 years are the easiest types of borrowers to qualify. Same with salary income wage earners where they make a certain salary and have been on their job for at least two years as a full-time salary wage earner. Overtime and other income wage earners can use OT/other income if it has been seasoned for two years. In this article, we will discuss and cover Part-Time To Full-Time Income Mortgage Guidelines.
Part-Time Income Mortgage Guidelines And Qualification
Borrowers can be part-time wage earners and use that part-time income in mortgage qualification as long as they have been in your part-time job for at least two years. There are workers who do not have full-time jobs and have two or mortgage part-time jobs. Borrowers can use all part-time job wages as long as they have been a part-time wage earner for at least two consecutive years. Cannot use the part-time income or multiple part-time incomes if they have not been employed as a part-time wage earner for at least two years.
Overtime, Bonus, and Part-Time Income Mortgage Guidelines In Mortgage Qualification
Overtime and bonus income can be used to qualify for a mortgage as long as the wage earner has had a history of earning overtime income and bonus income for at least two years. Need verification of employment from the employer states that the overtime and bonus income will continue for the next three years. Overtime and bonus income cannot be declining income.
Social Security Income, Pension Income, Disability Income
Social security income, pension income, and disability income can all be used for mortgage qualification and many times can be grossed up to 15%. Royalty Income can be used if the likelihood is likely for the next three years. Rental income can be used if it is likely to continue for the next three years.
Self Employment Income Mortgage Guidelines
Self-employed business owners can qualify for a mortgage as long as they provide two years of tax returns. Self-employment income borrowers oftentimes have a difficult time when qualifying for a mortgage due to the many write-offs. Only the adjusted gross income will be used when qualifying income for self-employment income borrowers.
Commission Income Paid Via W-2
1099 wage earners and/or commission income wage earners such as mortgage brokers, mortgage bankers, real estate agents, car salesmen, or salespeople need a two-year employment history. This holds true even though you get paid by your employer with a W-2. Mortgage underwriters will pay special attention to whether or not these wage earners have had a steady income in the past two years. If they had increasing income or steady income for the past two years, both years’ income with be averaged. If the commission income wage earner had a declining income, the most recent declined income will be used. The 12-month average of that year will be used for income mortgage qualification.
Part-Time To Full-Time Income Analysis By Underwriters
There are special regulations when it comes to part-time to full-time income in mortgage qualification. Part-time employees or temporary employees with an employer who went from part-time status to full-time status with the same employer recently, lenders like myself will go off the full-time income. This holds true as long as they can get a written verification of employment stating this fact.
Qualified Income Used If Borrowers Go From Part-Time To Full-Time Income
We will not average part-time income to full-time income. We will just go off full-time income as long as the borrower can provide 30 days of paycheck stubs Need to be careful about which mortgage lender borrowers choose. Depending on the lender, many lenders will average part-time income and full-time income for the past 24 months. Many times this will create a shortfall when it comes to mortgage qualification.
Part-Time To Full-Time Income Employment Gaps Mortgage Guidelines
Borrowers can have gaps in employment in the past two years and still qualify for a mortgage loan. Borrowers with more than a 6-month gap in employment, need to work for at least six months on a current full-time job in order for them to qualify for a mortgage loan. Borrowers with six months or less in the gap in employment will qualify for a mortgage right always. This holds true as long as they have obtained full-time employment with written verification of employment. Borrowers just need 30 days of paycheck stubs in order to close on the home loan.
HUD Part-Time Income Mortgage Guidelines On FHA Loans
HUD Part-Time Income Guidelines allow part-time and other income to be used as qualified income on FHA loans. If the borrowers have part-time, overtime income, bonus income, commission income, the borrower needs to have had that income for the past two years Mortgage lenders want to make sure that the part-time and/or other income will continue for the next three years In order to substantiate whether or not the part-time income is stable or not, a history of the past two years is required.
Two-Year Employment History on Part-Time and Other Income
If borrowers had a history of two years of part-time and/or other income, the chances are it will continue. Lenders want to make sure the borrower has the ability to repay their new home mortgage loan with no stress. As long as borrowers can meet HUD Part-Time Income Guidelines on FHA loans, they are able to use other income besides their full-time income from their main job.
Only Qualified Income Of Borrowers Can Be Used By Lenders
Only qualified income can be used by mortgage underwriters on government and/or conventional loans. Cash income does not count in the mortgage world. All income sources need to be documented. Many borrowers with full-time jobs have other income besides their basic salary and/or 40-hour workweek wages. However, lenders have strict regulations and guidelines on how other income besides the main income from their full-time job can be used.
The Importance of Qualified And Verified Income
Qualified income is key in qualifying for a mortgage. Credit and income are key when qualifying for FHA loans. When it comes to income, the income used in qualifying needs to be qualified and verified. Borrowers making cash income cannot be used. Cash in the mortgage business is non-existent. Documented income needs to be verified as well. Lenders are concerned with the ability to repay their new housing payments.
The Ability To Repay New Mortgage Loan
The main concern of mortgage underwriters when underwriting a borrower’s file is their ability to repay their new housing payment. Lenders want to see borrowers making a history of stable income and the likelihood for the income to continue for the next three years remains strong and likely. HUD Part-Time Income Guidelines state that part-time and other income can be used. However, the borrower needs to have had part-time and/or other income for the past two years in order for it to be considered as qualified income. HUD Part-Time Income Guidelines and ways of using part-time and/or other income as qualified income.
What Is Qualified And Verified Income
Only qualified and verified income can be used in mortgage lending. HUD Income Guidelines require the mortgage underwriter to verify employment and income. It goes a step further. HUD requires the mortgage underwriter to determine if the employment and income are likely to be income for the next three years. Mortgage underwriters have full underwriter discretion on whether or not other income besides the borrower’s main income can be used. It is the role of the mortgage underwriter to make sure the borrower’s employment and income are both stable and the borrower has the ability to repay their new mortgage payment on time.
Two-Year History Of Income & Mortgage Denied
The mortgage underwriter needs to make sure the borrower’s income and employment are likely to continue for the next three years. If the mortgage underwriter feels the probability of the part-time and/or other income will not continue for the next three years is not good, the underwriter can decide the other income cannot be used.
This holds true even though the borrower had a two-year prior history of earning part-time and/or other income. Mortgage underwriters will decide not to count other income for borrowers with a two-year prior history of making other income in cases where the other income has been declining. Other cases where mortgage underwriters decide the part-time and/or other income cannot be used in cases where the income is not consistent and/or irregular.
Types Of Employment And Income Used by Lender to Qualify Borrowers
Full-time income can be used as qualified income. Borrowers do not have to have the same job for the past two years. Employment gaps in the past two years are allowed. If a borrower has a gap in employment for six or more months, then the borrower needs to be in their new job for six months. If the borrower has been in a new job for less than six months, then 30 days on their new job is required with employment gaps. Job changes in the past two years are allowed.
How Part-Time Income Can Be Used
Part-time income and other income are allowed as qualified income as long as the following conditions can be satisfied:
- Have been in a part-time job and/or had other income for the past 2 years
- The part-time income is not declining
- The part-time employment and job is likely to continue for the next three years
- Borrowers who have multiple part-time jobs can use all of their income if they have been on all part-time jobs for the past 2 years
- The likelihood for the employment to continue for the next three years needs to be promising
Income cannot be declining from one year to the most current year. Mortgage underwriters can say part-time and other income cannot be used if she sees the income has been declining and/or the income is irregular.
Part-Time And Other Income On FHA Mortgage Loans
HUD 4000.1 FHA Handbook states the mortgage underwriter needs to verify the primary borrower’s employment. This is on page 188 of HUD 4000.1 FHA Handbook.
We are also experts in non-QM loans for borrowers who cannot qualify for government and conventional loans. Our Non-QM Mortgage One Day Out Of Foreclosure and Bankruptcy is one of the most popular home mortgage programs available in today’s hot booming housing market. We offer a no-doc stated income with only one year of self-employed experience with no income tax returns required with a 25% down payment. The borrower needs to prepare their own P and L statement for the past 12 months. The borrower can complete the P and L by themselves and does not need a CPA to do it.
January 24, 2022 - 8 min read