You are starting a new job. Can your Projected Income for that New Job be used to Qualify you for a Mortgage? The answer is simple - it is YES and NO, with "NO" being the most likely final answer - unless the Lender plans on keeping the loan in their portfolio!
Read Mortgage Loan Originator George Souto's explanation below:
Determining usable income to qualify for a mortgage can be tricky these day, but it is even more tricky when it's income that is not commonly used. Such is the case with Projected or Future Income. Answering the question Can Projected Income For A New Job Be Used To Qualify For A Mortgage? is not a simple Yes or No answer, because some of the guidelines are conflicting and unclear. When confusing guidelines are combined with the Layering of Lender and Investor Guidelines, giving a clear and decisive answer to the question becomes even more difficult.
The best example of how conflicting and unclear the guidelines can be on the use of Projected or Future Income, is in the FHA Guidelines. The FHA Guideline reads as follows:
"Projected income is acceptable for qualifying purposes for a borrower scheduled to start a job within 60 days of loan closing if there is a guaranteed, non-revocable contract for employment. 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.
The loan is not eligible for endorsement if the loan closes more than 60 days before the borrower starts the new job. ......"
Sound pretty clear right? If the Borrower can produce an employment contract, such as the contract that Teacher get between the end of one school year, and the beginning of another, or when a new Teacher is hired during the Summer months. Another good example would be a Physician who is about to graduate, and beginning his/her residency with a Hospital soon after graduation. Under these and other similar situations, according to the guideline above these professionals, as well as others with a "guaranteed, non-revocable contract for employment" can us the Projected Income to qualify for a mortgage as long as the Borrower will begin work within 60 days after the closing. Pretty clear right? Well it would be if the Guideline did not have one more little sentence.
"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."
Huuuuuuuh? How can someone who has not started a job yet, produce a pay stub for income they have yet to receive? The answer is they cannot, and with the number of loans that Lenders are being forced to buy back because a guideline was not followed, or misinterpreted. It is highly unlikely that a Lender is going to take the risk of the last sentence coming back in the future to bit them in the donkey.
Therefore, even thought this FHA guideline makes it seem like at first you can use the Projected Income, the doubt created by the last sentence will result in a Lender not only not allowing the income to be used until a pay stub can be produced. But they will most likely want a pay stub showing that the Borrower has received at least 30 days of Year-To-Day of income, which will require the Borrower receiving more than one pay stub.
Can Projected Income For A New Job Be Used To Qualify For A Mortgage? The answer is simple, it is YES and NO, with the NO being the most likely final answer, unless the Lender plans on keeping the loan in their portfolio. Now that is very clear right?
Info about the author:
George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or firstname.lastname@example.org
Frederick Griffin, Licensed Florida Real Estate Broker
Tallahassee Florida Metropolitan Area
Disclaimer: Nothing in the above blog article is to be construed as legal advice, tax advice, or financial advice. For legal advice see an attorney. For tax advice or financial advice see a tax attorney, certified public accountant, or other qualified professional.