Employment and stability of employment is very important when qualifying to buy a home. In a mortgage underwriter’s perfect world all buyers would be employees working 40 hours a week with a set monthly salary. You know as well as I know that this is just not true these days. Many people have an hourly rate with 30 to 70 hour a week jobs, bonuses and sales commissions, second jobs and side jobs. Of course we must not forget the self-employed borrower since entrepreneurial ship is the corner stone of our economy.
When a potential homeowner works overtime (more than 40 hours a week) we have to take a two year average of the overtime worked. This means if you started your job 6 months ago and you are counting on your mandatory overtime to qualify you for a home loan, you are going to be let down. If on the other hand you have been working the mandatory overtime for 18 months and your employer will state on an employment verification that you overtime is likely to continue we have a better chance of qualifying you for the home loan using a 24 month average of your overtime.
Another sticky subject is bonuses and sales commissions; again you need to have a two year average to use your bonus and commissions earned before we can use the income towards qualifying you for a home loan. Also, like many sales people you may write off non-reimbursed employee expenses such as gas mileage on your state and federal taxes. The amount of non-reimbursed expenses you write off will be deducted from your income.
Again, if you have a side business you must have two full years of income showing on your taxes, a business license and a letter from your CPA stating you have been in business for at least two years.
In general if you have a second job you must have at least two years on the job before we can count the income towards qualifying for a home loan. There are case by case exceptions to the two year rule for second jobs.
To sum employment stability up your income has to be on going and in most cases there must be a two year history of you working in the same industry. If overtime, bonuses, and sales commissions need to be used as income generally you must have a two year history of the earnings. Contact me today if you are planning to buy a home in the next six months to a year so you are approved before you dip your toes into the housing market..
In the next few weeks I will write about self-employed borrowers. Please contact me today for a loan qualification or consultation.
I will be writing a series of informational pieces for my blog in the weeks to come. Please let me know what you would like me to talk about.
Kathleen Beck, Sacramento Mortgage Lender, 916.722.0395, http://www.BeckHomeLoanPro.com