This BLOG On Income Mortgage Guidelines With Less Than 2 Years Was PUBLISHED On October 23rd, 2019
Most lenders want to see 2 years of the same employment history from mortgage applicants. There are two types of lending requirements:
- Agency Mortgage Guidelines
- Mortgage Overlays by each individual lenders
All lenders need to meet agency guidelines on government and conventional loans.
- However, most lenders have a second tier of lending requirements called lender overlays
- Gustan Cho Associates Mortgage Group are national direct lenders with no overlays on FHA, VA, USDA, and Conventional Loans
- We just go off Agency Mortgage Guidelines and do not care about any other lending requirements
- Over 75% of our borrowers are folks who could not qualify at other lenders due to their lender overlays
Mortgage Agency Guidelines Versus Lender Overlays
Gustan Cho Associates has no lender overlays on government and conventional loans.
- Overlays are additional lending requirements above and beyond those of Agency Guidelines
- For example, most lenders require a 620 to 640 credit score on FHA Loans when the minimum credit score requirements by HUD for 3.5% down payment FHA Loan is 580
- Same with debt to income ratios
- Most mortgage companies require a 43% to 50% debt to income ratio on FHA Loans when the maximum cap required by HUD to get an approve/eligible per AUS is 56.9%
- The lower DTI cap is called overlays by mortgage companies
- Again, GCA Mortgage Group has no overlays on FHA, VA, USDA, and Conventional Mortgages
- Most lenders do have overlays on part-time and overtime income where they require any other income with less than two years cannot count
In this article, we will cover and discuss income mortgage guidelines on other income with less than 2 years of seasoning.
Income Mortgage Guidelines On Other Income
Again, income mortgage guidelines with less than two years seasoning can count as qualified income at Gustan Cho Associates Mortgage Group and we will explain how and why.
Other income per income mortgage guidelines on all government and conventional loans programs are defined as the following:
- Part Time Income
- Overtime Income
- Bonus Income
- Royalty Income
- Commission Income
Most lenders will not allow other income to count as qualified income if the other income has not been seasoned for two years and the likelihood to continue for the next three years. Gustan Cho Associates Mortgage Group will allow other income as long as the borrower had it for at least the past 12 months and the other income looks promising that it will continue on for the next three years.
How Is Other Income Calculated By Underwriters
Again, the topic I am covering today is Agency Income Mortgage Guidelines.
- Not all lenders need to abide by these mortgage guidelines
- Every lender can have overlays on all of their loan programs
- All mortgage companies need to meet agency guidelines
- However, they can have that second tier of lending requirements called overlays
- And this includes how they want to treat other income
- Lenders are not obligated to use any other income if it has not been seasoned for 24 months
- However, GCA Mortgage Group and a few select other national lenders with zero overlays on government and conventional loans can allow borrowers with less than 24 months other income as qualified income
How Mortgage Underwriters View Other Income
Here is how it works:
- Other income is overtime, bonus, commission income can be used as qualified income with less than 24 months seasoning
- Need to have a minimum of 12 months of consistent other income
- The outlook of continuation for the next three years needs to be positive and promising
- If a borrower has 14 months of part-time and/or overtime income year up to date, here is how it is calculated:
- take 14 months of other income and divide it by 24 months
- The resulting figure will be the monthly income
- If a borrower had part-time and/or other income for 18 months, then 18 months will be divided by 24 months to yield the monthly gross qualified income that can be used
Qualifying For Mortgage With Employment Gaps In Past Two Years
Borrowers can have gaps in employment in the past 24 months and qualify for a mortgage.
Here are the rules on employment gaps:
- If the borrower had gap of employment for six months or less, there is no seasoning period on a new job
- The borrower had six or more months in the employment gap, then there is a six-month seasoning on a new job to qualify for a mortgage
- Two years of employment history is required prior to the employment gap
- Borrowers who go from 1099 to W2 wage earner, there is no waiting period to qualify for a mortgage and we will just use the new full-time income on the offer employment letter
- If borrower go from W2 wage earner to 1099 wage earner, there is a two year seasoning wait period because two years 1099 income is required
- Being employed in the same field does not matter
Please contact us at Gustan Cho Associates Mortgage Group at 262-716-8151 or text us for a faster response with any questions. Or email us at email@example.com. Our licensed and support personnel are available 7 days a week, evenings, weekends, and holidays.