Identifying what is and is not acceptable income when a Borrower has more than one job whether part time or seasonable can get sticky! On more than one occasion, I’ve had calls from clients I had done a pre-approval on for a price range lower than they’d hoped for who to circumvent the income issue, went out and obtained a 2nd job. Sounds great, but wait, that income may not necessarily be used in qualifying you for a higher loan amount.
In order for income from a 2nd job to be counted in addition to that of your primary, the following must occur:
When using any of the traditional conventional, FHA, VA or USDA loan products, there is a minimum of a 2-year simultaneous work history required. Why, one might ask? Well the answer when considered logically is not really out of line. How many people can hold up to the pressures of working 2 jobs simultaneously for an extended period of time, giving up sleep, personal time, etc. to hold it all together. In the lending world, the feeling is that the test is a matter of time.
The work history for either job may include different employers, the key is that there is not a gap in the simultaneous work history and that it covers a full 24-months and is on-going at the time you close on your home purchase or mortgage transaction.
So that all makes sense, but how is income looked at when the 2nd job is from seasonal income? In this instance, one would need to verify that the income has been from the same job with the same employer that the Borrower has worked for the past 2-years and that the job is likely to continue seasonally going forward. Such income must be documented, clearly associated with seasonal layoffs, expected to recur and is reported on Federal tax returns.
In the case of FHA financing, they’ll take it 1 step further an allow unemployment income to be used on the off-season, if they have the full 2-year work history in this seasonal work and its verifiable that the work will continue next season.
Surprisingly, Foster care income is not looked at the same across the board when figuring a Borrower’s allowable income for qualifying.
If one is obtaining a conventional loan, they have a 2-year history of foster care and it can be confirmed that the foster care income is likely to continue, you’re golden! In some instances, a full 2-year history is not required if the Borrower has at least a 12-month history of providing foster care services and the incomes does not represent more than 30% of the Borrower’s total gross income being used to qualify them for a mortgage.
Interestingly enough, this same reasoning does not apply when one is obtaining an FHA, VA or USDA loan. In the case of these 3 government loans, foster care payments are considered to be reimbursement for expected expenses in providing care for the foster kids and not a source of income and foster care income, regardless of the length one has received it, cannot be used.
As always, give me a call at 360-456-1200 should you have any questions surrounding this post.