January 12, 2017
FHA loan rules require the lender to verify both employment and income. The lender must determine that a borrower’s income is both stable, and likely to continue for the purpose of making the mortgage loan payment. But what kinds of employment can a lender use to qualify the borrower?
A reader got in touch with us recently to ask, “What if I have a 20 year old borrower that graduated HS in 2014. She has 2 jobs (receptionist at both). One shes had for 2 years 9 months and only works 15 hours a week and the second shes had for 1 year 4 months and puts in 20 hours a week. Will FHA accept both incomes as qualifying income?”
FHA loan rules covering this issue are found in HUD 4000.1. The lender must verify “primary employment” which is defined as follows on page 188:
“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.”
FHA loan rules 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.”
Lender standards may also apply, so it’s best to assume that such circumstances would have to be reviewed on a case-by-case basis. It’s entirely possible that state or local ordinances may also play a part in what’s possible, depending on a variety of factors which may or may not be present including community property laws in cases where the applicant is legally married.
Bruce Reichstein has spent over three decades as an experienced FHA and VA home loan mortgage banker and underwriter where he was responsible for funding “Billions” in government backed mortgage loans. He is the Managing Editor for FHANewsblog.com where he educates homeowners on the specific guidelines for obtaining FHA guaranteed home loans.
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