It is quite obvious that when you apply for an FHA loan, the lender will need to evaluate your income. Sometimes your income is not as straightforward as you might think, though. If you are not a straight salaried employee that works a consistent 40 hours a week, your income might get calculated a little differently than you would anticipate. This is not always bad news; you just need to understand the differences, especially when it comes to part-time and seasonal income as they are not the same thing and might make or break your ability to get approved for FHA financing.
Part-time income is money you make working less than 40 hours a week. Typically, the FHA requires that you have made this income for the last 24 months consistently. That can seem like a rather gray area since part-time is not a standard 40-hour week. Here are a few examples of what would likely be able to be used:
- You work in an office on a part-time basis, working a consistent 20 hours a week for the last 3 years. This is consistent and predictable and will likely be able to be used in your qualifying income.
- You work at a retail store part-time, but your hours vary. Sometimes you work 30 hours a week and other weeks you work 15 hours. It depends on the seasons and level of business at any given time.
- You have worked at the same store for the last 5 years. This is consistent income as well – the difference is the number of hours you work, which the lender will average out over the last 24 months to determine your income since it fluctuates so much.
Here are a few examples of part-time income that might not be able to be used:
- You work in an office, but only on an as-needed basis. Some weeks you are needed every day, while other weeks you are not needed at all. The work is very inconsistent, which typically tells the FHA that it is not a reliable source of income and is not able to be used.
- You started working at a retail store within the last 6 months. You work 20 hours a week every week. Even though the hours have been consistent, you are not able to use this income because it does not have a long enough history for the FHA to consider it reliable and predictable.
Seasonal income differs from part-time income when it comes to applying for an FHA loan. Seasonal income is not year-round income, but rather an income that you make at a certain time every year. The season must be able to be identified and you must have worked at the same job for the last 2 years during the seasons that the job is applicable. This shows the FHA that you have reliability and consistency with this job. Here are a few examples of seasonal employment that would likely get approved:
- You work at a pool over the summer. You have worked at the same pool for the last 4 years between the months of June- August. The hours vary, but the income is able to be used because you make money between the same months every year and you have been there for 4 years. As is the case for part-time income, the lender will take an average of the income over the time you work there to account for the fluctuating hours.
- You work at a Christmas store during November and December. During that time you work 40 hours and you have worked there for the last 5 years. This income would be able to be used as a part of your qualifying income as well. Because you worked there for the last 5 years and it is always during the same time every year, an average of your income will be used from this job.
Season income that might not be used for qualification for an FHA loan:
- You work odd jobs throughout the summer months – sometimes mowing lawns, other times cleaning pools. You have only done this for one summer, but plan to do it again this summer. This income could not be used because you have not earned the income for at least 2 years and it is not consistent. You are working too many different odd jobs that are not reliable or consistent.
- You have worked as a Santa’s helper over the last few years, but not every year; it depends on what is going on at your full-time job at that time. Because this income was not received every year, despite the fact that you worked there for more than 2 years, it could not be used. The lender needs to see that you not only have worked there consistently but that the likelihood of you continuing to work there is good.
Understanding the difference between part-time and seasonal income can help you determine what income will get used for your FHA loan application. The good news is that if your income is consistent and you can prove that you will continue to make that income in the future, you have a good chance of being able to use it for qualifying purposes.