April 6, 2015
A reader asks, “I was trying to get a FHA loan however once all my documentation was sent to the underwriter she denied me, because I am employed by my mother and he VOE was filled out by her. They denied my because they could not use that income. I have my pay stubs & my w-2′s. Where they telling my the truth or just didn’t want to give me the loan because i am only 21. I feel like they didn’t want to give me the loan because i am so young. Everything checked out however they just refused to approve me because my mother filled out the VOE.”
Unfortunately there is a great deal of information missing from this reader question that makes it impossible to speculate as to why the loan might be turned down. One important thing to remember in cases like these is that lender standards will play an important role in how such information is handled. If the lender has specific standards or requirements that are not met in cases like these, loan approval may not be possible.
Important information that the lender would need to know about the employment relationship as mentioned above in the reader question include whether or not the employment was full-time, how long the employment has lasted to date, whether or not the employment is seasonal or not, and the nature of the employment itself.
Did the applicant work for a family business? Was the employment salaried, contracted, or “casual labor”? Were commissions involved and how long did they continue once commission income began? These are all very important factors to remember.
A lender may not be able to verify commission income, for example, if it has not continued long enough. A borrower who has only a short time on the job or a short time working under a commission pay structure may have to wait until more than a year has passed (sometimes two or three) before the commission income can be used as “verifiable income”. On top of that, if the commissions have decreased rather than increased, this could be a problem for the lender.
The nature of the employment mentioned in the reader question can be tricky for a lender to verify. Both FHA minimum standards AND lender standards come into play, so there will be more than one set of rules governing transactions for those who are either self-employed or working as part of a family business.
Do you have questions about FHA loans? Ask us in the comments section.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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