Many Americans today are either part-time employees, freelancers and multi-income earners. It’s nothing new. In fact with new opportunities for freelance and gigs, their numbers are growing.
In terms of qualifying for home loans, many would think that their chances of getting approved are slim to none. Many feel that the nature of their employment poses a common notion that has to do with its stability and predictability.
You might have more questions in mind but to create a clearer picture for everyone, part-time income earners can definitely apply for an FHA loan. And like any other mortgage application, there are specific requirements that need to be met.
As defined by the HUD, Part-time employment is referred as the “employment that is not the Borrower’s primary employment and is generally performed for less than 40 hours per week.”
Proof of employment
However, this doesn’t specifically prohibit the borrower to use part-time income as the main source of funds when applying. Based on the standard guidelines set by the HUD Handbook, the borrower may use his/her part-time employment as “effective income.”
To back up your ability to pay the mortgage, the borrower should have enough proof having worked for at least two years and is likely to still continue working for the same employer for a reasonable amount of time. This creates a sense of stability despite the nature of the employment.
Calculation of effective income
From HUD’s handbook, the borrower must calculate the average income for the past two years of employment. Further guidelines indicate using a 12-month average of the current pay rate if the borrower “can document an increase in pay rate.”
Lender standards still apply
Keep in mind that in line with complying with the qualifying requirements, there are specific standards that lenders also set. The next best thing to do is to consult with an expert that will help you walk through every step that needs to be met.