April 8, 2014
FHA home loan rules say the lender must verify a borrower’s income and employment as a qualifying factor for the loan.
A borrower who lists his or her income as X amount of dollars will have that figure verified–the lender will check pay statements, review tax records, and possibly even speak with an employer in some cases to verify the information.
But what about borrowers who don’t have income at the present time, but have “projected income” based on a job that is about to start soon, or income that is about to increase because of a promotion, pay raise, etc? Does the FHA loan rulebook make any provisions for these circumstances?
According to HUD 4155.1, Chapter Four Section E, “Projected income is acceptable for qualifying purposes for a borrower scheduled to start a new job within 60 days of loan closing if there is a guaranteed, non-revocable contract for employment.”
This puts the burden of proof on the borrower and the lender, Chapter Four instructs the lender, “The lender must verify that the borrower will have sufficient income or cash reserves to support the mortgage payment and any other obligations between loan closing and the start of employment.”
Furthermore, “The loan is not eligible for endorsement if the loan closes more than 60 days before the borrower starts the new job. To be eligible for endorsement, the lender must obtain from the borrower a pay stub or other acceptable evidence indicating that he/she has started the new job.”
The rulebook also provides an example to help clarify the issue:
“Examples: A teacher whose contract begins with the new school year, or a physician beginning his/her residency fall into this category.”
Do you have questions about FHA home 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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