Home buying with a part-time job is nothing new
Lenders are easing mortgage qualification requirements by the day.
Home buyers are discovering they can qualify for aggressive new programs like HomeReadyTM thanks to flexible guidelines and low mortgage rates.
Accessible homeownership cannot be attributed solely to new programs, however. Years-old guidelines are helping too.
One of those rules is regarding income from part-time jobs.
Applicants who work one or more part-time jobs can use that income for mortgage qualifying.
Part-time income rules are fairly straightforward. With a small amount of extra documentation, applicants can buy a home without a full-time position.
Part-time jobs are a popular source of income
Part-time employment is a valuable source of income for workers across the country.
In December 2016, more than 32 million Americans worked 34 hours or less per week, according to the Bureau of Labor Statistics.
These workers are probably closer to home buying eligibility than they think. Lenders can accept income from part-time employment for most individuals with adequate work history.
This is true whether they have a single part-time job or a part-time second job in addition to full-time employment.
Qualifying with a part-time second job
If someone with two jobs applies for a home loan, they will have a few more pieces of documentation to submit to their lender.
Time on the job is the key factor. Most lenders need to see a two-year history of the second part-time job before they will count it toward total income for mortgage qualifying. In addition, they will want to see the applicant has worked two jobs simultaneously for two years.
This history can be documented with W2s from both employers. You will also gather your last three to four paystubs from both jobs to show current earnings.
Lenders must ensure the applicant can maintain two jobs and has not taken on an unsustainable work load in efforts to afford the home. If an applicant has been working both jobs for two years, the lender assumes he or she can continue to do so.
Mortgage approval with one part-time job
Some home buyers do not have a second part-time job in addition to a full-time job, but a single part-time income stream. They can use this income to qualify for a home as well.
The guidelines are different and less restrictive if you have a part-time job as your sole source of income.
For instance, a nurse who works twenty-four hours per week will verify income the same as a 40-hour-per-week office worker.
Neither of these employees would need two years of work history necessarily. The lender only needs enough information to determine that the income is stable and likely to continue. A home buyer’s history of related employment or education is often enough evidence of stable income.
Each circumstance is different, so applicants should check with their lender if they are unsure if their income will help them qualify.
Income rules not set in stone
The two-year rule is not set in stone. In some cases, part-time income guidelines are flexible.
If you have had a part-time or second job for less than two years, present your case to the lender that the income is likely to continue.
Request a letter from your current employer stating your value to the organization and that your position is stable.
If you can’t show your job is stable and you haven’t worked there at least two years, your lender may still consider the extra income as a compensating factor. This means your income can help you be approved even though the lender cannot officially use the income for qualification purposes.
Part-time income is not always usable, but certainly worth asking your lender about. Sometimes, you just need a few more months of employment history or an explanation letter from an employer to use your income from a part-time job.
What are today’s rates?
Many renters with part-time incomes assume they are not eligible to buy a home. For many, it’s just not the case.
Today’s mortgage programs such as FHA and USDA are mandated to prompt homeownership among a population that would not qualify for other types of financing.
Renters who are ready to own should discover what they can afford with a written lender analysis and rate quote.