How Your Income and Employment is Evaluated When You Apply for a FHA Loan is a post from: FHA,VA and Conventional Home Loans in all 50 States

 This post is a review of how your income and current employment will be evaluated in the FHA loan approval process. 

Latest two years of employment verified 

FHA likes to see two years of stable employment.  There are many exceptions however for gaps in employment.  For example, if you are just graduating from college or professional training, you do not need two years of employment as long as you can document that you were in school previously and you are now employed in your profession of study.   And there are many, many exceptions.  Please inquire about your situation.

 Overtime and bonus income

To count this you must have received this income for 24 months and we will average this income over the last 24 months.  There must be evidence it will continue.

Part-time employment 

Must have a two year history

Commission income

You must have a two year history and we will average this income over the last 24 months.  Your last two years federal tax returns all pages are required to calculate this income.

Unreimbursed business expenses (2106)

These expenses will be subtracted from you qualifying income.

Alimony and child support income

You can count this income towards qualification if it will continue for three or more years and you will need to provide the divorce decree and 12 months evidence of receipt of funds.  This income can be multiplied by 1.25 since it is not taxed.

Government assistance

This can be counted as income if you can document it will continue for three more years.

Self-employed or 1099 independent contractors

You will need to supply you last two years tax returns all pages and schedules and your NET business income will be what is used as you qualifying income.   There are a lot of details regarding self-employed income, please call or email me with questions.

So that is a brief review of some items that will be needed and how your income and job history will be evaluated when applying for a FHA loan. 

Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions about your employment history or income, or any other questions at all about getting approved for a FHA Loan.

Warmest Regards,

Rob Chomentowski

Sr. Loan Officer (and FHA specialist)

858-922-7899

homeloan8@gmail.com

FHA Loans and Borrowers Income is a post from: FHA,VA and Conventional Home Loans in all 50 States

Since FHA loans require full income documentation from each borrower, here is a quick review of an FHA underwriter will be looking for with many different types of income.

W-2 employee

You will have to provide your last 2 years of w-2′s + your most 30 days pay stubs.  Any gaps in employment over 1 month during the last 2 years will need to be explained.  After a large gap in employment, the FHA loan underwriter may require 6 months on your current job before approval.  However there are exceptions to this rule if a borrower is getting out-of school or training and can provide a degree or transcripts.  Of if a borrower was on sabbatical or maternity leave for example.

Bonus and overtime income

Generally you need to document that you have received this for the last 2 years.  The underwriter will average of the last 2 years of this income. 

Part time job and seasonal work

You can count income for a part-time job if it has been consistent for 2 years and you can fully document the income.  Seasonal work is OK if you have worked for the last 2 years at it and it is likely to continue.

Commission income

You will have to document the last 2 years of commission and the FHA underwriter will average the last 2 years.  Copies of your last 2 years federal tax returns will be required.  Unreimbursed business expenses appearing on your ta returns must be subtracted from you qualifying income.

Alimony and child support

This income can be counted towards qualification.  You will need to provide final divorce decree or legal separation agreement.  This will have to document that support will continue for at least 3 more years.  You will need to document that you have been receiving it for the last 12 months (canceled checks, deposit receipts).   In some cases you can still count it if received for less than 6 months.

Interest and dividend income

You will need a 2 year history of this income and an average of those 2 years will be used.

Self-employer borrowers

Your last 2 years tax returns all pages and schedules will be required.  The FHA loan underwriter will take an average of your net income over the last 2 years.  It’s key to note that your net income AFTER deductions will be used to qualify, not your gross income.  There are some deductions that can be added back to your net income such as contribution to retirement accounts, depreciation, business use of a home, etc… (call or email rob@affinity-financial.com) for more info.  You will have to have a 2 year history of being in business to qualify.  If you just left a w-2 job 1 year ago to start a business, you may have difficulty qualifying.

There are of course many other variations and exceptions to the above regarding income and other items left out.  So if you have any questions about you particular income and if you will qualify, don’t hesitate to email or call me using my contact info below.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer (and FHA specialist)

rob@affinity-financial.com

858-922-7899