I have two jobs, I work on the side, I have a part time job or I have my own business….these are all things I hear when I am talking to clients about qualifying for a mortgage. Sometimes we can use all your income, sometimes we can’t. So how does that work?
The biggest question is time. How long have you been receiving your income? Do you work at one job and do you have a two year history? You may not even need two years on the same job – just two years of employment that we can verify. Now what if you are working two jobs? Do you have a full time job and a part time job? If you have been on both jobs for two years, we can use both incomes. If you have only been working for a short time at both jobs, we can’t use the part time income – or maybe the full time income – it depends how long you have been at both jobs.
Keep in mind that underwriting will want to verify income and that it will continue – they also look at the stability of the income. Ideally we need to show that your income will continue for three years. There is no way to prove your employment will continue for three years, but with a two year history and as long as your position is not temporary, we can use your income.
What about child support or alimony? We need to show that you will receive that income for at least three years. So if you have a 16 yr old child, we can’t use the child support as it typically ends at age 18. If you are receiving alimony and it will continue for 3 years, we can usually use it.
Bonus and commission income also require that you have received the income for at least two years. Along with that, we usually get a verification of employment that states your bonus and commission income is likely to continue. Are you self employed? If so, we need to get two years of tax returns to verify that income. With bonus, commission and self employment income, if it is declining, underwriting may not want to use it or may lower it based on the most recent income.
Disability income and social security income is similar – we need to show that your income will continue for at least three years. Retirement income is the same – we need to document that it will continue for at least three years.
Tip income – we can only use what you claim, so if you keep your cash, we can’t use it as we have no way to document how much you get. We can use what you have averaged for the past two years on your w2’s and paystubs.
Unemployment income – if you work seasonal jobs where you get laid off in the winter, as long as you have a history of unemployment income (again two years), we can use that income in qualifying.
If you aren’t sure about your income, talk to your loan officer. We can look at your income and the history and help you figure out what we can use. If we can’t use it in qualifying, it can be a compensating factor which can help your file. Make sure you can document your income – that way we know what we can use. Sometimes the type of loan you are doing may affect your income – we may need more or less documentation depending on the type of loan. Check with your loan officer and see what works for you! Sometimes you may not want to use overtime or bonus income – that way you know you are not maxing out what you can qualify for! Just make sure you are comfortable with the mortgage payment so you know you can afford your new home!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc., An Equal Housing Lender, NMLS#150953 – Email – Website
