- Length of time on the job: –Lenders want you to be on your present job for 12-16 months, whether it be part-time or full-time status. The exceptions to the rule are:
- Job change in the same field.
- Relocation from one town to another with only a short break in employment.
- Just finished school and got a job in your field.
- Homemaker now getting paid for your labor.
- Retired, military-employed in the same field that you were doing service.
- Self-employed people have to have 20 months on the job.
- Working for a temporary employment agency does not count as a job..sorry.
- If your employer has you in a probationary status, it won’t work until you’re out of it.
- If your work is seasonal, like teachers or construction workers, you’re ok.
Let’s start with the hardest and work up
Self-employed people. The reason they are so tough on self-employed people is that the income is really, really hard to verify. Unlike someone who gets a W-2 or a 1099 from a company, you need to make sure you’re preapproved for the loan before you write the contract. Your income will be averaged and the average is based upon what you declare as your gross taxable income for the last 20 months. Now the problem- we try to declare as little as possible to avoid taxes, but on qualifying for a home, it hurts you. You may have to bite the bullet and declare what you are really making for at least 20 months because there is no way around it on a FHA, VA, or conventional loan. B, C, and D paper you could do it, but you’re already aware of the consequences of that, so like I said, there’s no way around it. If you have not completed 2 years as a self-employed person, the lender will require a CPA to do a profit and a loss statement for you for the 2nd year as verification of that year’s income, otherwise, they will not let you do it. The only exception to that is if you’ve been in business for a few years.
If you get a W-2 or 1099 from your employer, the lender will count the following:
- Your salary.
- Your hourly X number of hours you work each week, whether it be part time or full time.
- Your yearly bonuses- only if you’ve already gotten one and your employee status you will be getting another.
- Quarterly bonuses, if you’ve gotten 3 or more before.
- A pay increase if it occurs prior to the closing date on your home.
- Overtime-only if you’re presently getting it and have shown a consistent history of getting overtime presently and in the past.
- Commissions-only after you have gotten them for at least one year.
- Social security counts as income.
- Child support can count as long as you can prove you actually get it and will be receiving it for at least ____ years.
- Stipends are the same as child support.
- Unemployment, welfare, and APC do not count.
- Undisclosed income.
These numbers are all in gross figures. I know, you never get close to what you make- don’t worry. There is no such thing as a liberal lender; they won’t let you buy more than you can afford.
All right, we’re done with income. Now let’s go to long term debts.
Long-term debts are debts that are recurring and show up on a credit report. They are calculated on the monthly minimum payment due each month to the creditor. (Car payment-monthly amount). But, if when you close, you have 10 months on FHA and VA loan, it is 6 months conventional. Not considered a debt – it’s the only bill like it.
Student loans: whatever the monthly payment is, if they are deferred for at least 1 year from the date of done purchase, they do not count. Loans you do when this is not payment due fee at least one year from closing do not count.
Credit cards you pay off every month do not count; otherwise you just use the minimum payment required by the creditor. If no minimum monthly payment is required, then use 5% of whatever present balance is as the payment.
Child support is whatever the court decided you should pay- even if you don’t. If you only owe it for ___ more months it is not considered a debt.
Back tax payments- whatever payment you
Medical bills- agreed to
School Tuition >do not count
401 Payroll Deductions