HUD Part-Time Income Guidelines In Qualifying For FHA Loans

This Article Is About HUD Part-Time Income Guidelines In Qualifying For FHA Loans

HUD Part-Time Income Guidelines allow part-time and other income to be used as qualified income on FHA loans.

  • However, if the borrowers has 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
  • 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

HUD Part-Time Income Guidelines

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 work week wages. However, lenders have strict regulations and guidelines on how other income besides the main income from their full time job can be used. 

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 payment
  • 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 requires 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 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.

Cases Where The Mortgage Underwriters Says Part-Time Income Cannot Be Used Even Though The Borrower Has A Two-Year History Of Making Other Income

Whether the part-time income cannot be used, even if the borrower has a two-year history of earning other income

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 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 is cases where the income is not consistent and/or irregular. 

What Types Of Employment And Income Can Lenders Use 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.

Part-time income and other income are allowed as qualified income as long as the following conditions can be satisfied:

  • Have been in the 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.

HUD Agency Mortgage Guidelines On Using Part-Time And Other Income On FHA Loans

What Are HUD Mortgage Agency Guidelines for Using Part-Time Income and Other FHA Loan Income

HUD 4000.1 FHA Handbook states the mortgage underwriter need to verify primary borrower’s employment. This is on page 188 of HUD 4000.1 FHA Handbook.

Primary Employment is the Borrowers principal employment unless the income falls within a specific category identified below. Primary employment is generally full-time employment and may be either salaried or hourly. However, this section doesn’t specifically address part-time employment. That is found further down on page 188, starting with a definition of what the FHA considers part-time work: Part-Time Employment refers to employment that is not the Borrowers primary employment and is generally performed for less than 40 hours per week. HUD Guidelines address the part-time income question here, stating: The Mortgagee may use Employment Income from Part-Time Employment as Effective Income if the Borrower has worked a part-time job uninterrupted for the past two years and the current position is reasonably likely to continue.

For more information on this topic or other mortgage-related subjects, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays. Over 75% of our borrowers at Gustan Cho Associates are folks who could not qualify at other lenders due to their lender overlays. Gustan Cho Associates has zero lender overlays on government and conventional loans. 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. Gustan Cho Associates offers a no-doc stated income with only one year of self-employed experience with no income tax returns required with 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. The team at Gustan Cho Associates prides itself in being a one-stop mortgage broker shop. Whether you are shopping for government and/or conventional loans, or alternative financing mortgage programs like our non-QM loans, Gustan Cho Associates is the go to place for all of your mortgage needs. Non-QM loans are for owner occupant primary homes, second homes, and investment property financing.

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