I took a new job in May, but I have been in the same job for over three years now. My husband has worked in the same job for five years, and most of his earnings are commissions. Are we eligible for a mortgage based on seniority, my recent new job, and my husband’s commission?
First of all, let me congratulate you on your new job. These are great questions, and lenders may have different recommendations for the lending programs they hold internally (also known as portfolio loans), so I will focus on the recommendations that most lenders follow.
In most cases, lenders require a minimum of two years of work for regular and FHA financing. Using your pay stubs, W-2 forms, and tax returns, lenders will determine your income by averaging your income over that time period. Income from commissions, overtime and / or bonuses cannot be used unless you have a two-year history. In your husband’s situation, his commissions can be used to calculate his total income. The consistency of his commissions will be a key factor in calculating his income, and this must be documented. The amount of commission income can also matter. For example, if his fee and commission income is less than or equal to 25 percent of his total income, the lender must use traditional employment documentation. If his commission exceeds 25% of his total income, the lender will require tax returns, including all schedules from the past two years. In most cases, the lender will use the lower of the average commission earned over the past two years, or the average commission from the previous year.
Since your new position matches the same job, this shouldn’t be a problem. Lenders typically need 30 days to serve in this new position.
You may have a small employment gap if you have previously had regular employment in the same profession. If you have been out of work for six months or more, the lender can take into account your current income if they can confirm that you worked in your current job for at least six months and had a two-year history on the same line. work before a break in employment.
If you changed jobs more than three times in a 12 month period, the lender may need to document that you received an increase in income or benefits in order to use your income.
A couple of comments about the self-employed. I understand that you may want to write off a significant portion of your income as a business expense, however this may minimize the amount of money you can receive as a borrower as the lender will use what is stated on your tax returns. While COVID has impacted many sole proprietors in 2020, it can be difficult to qualify for a new mortgage if your total income has dropped more than 20% from the previous year.
Again, I recommend that you check with your lender and they will be able to determine what it will take to document your income, as each loan program may have different rules. Feel free to contact me directly if you would like to continue the discussion. Thanks again for the great questions!
Branch Director, NMLS No. 1721861
Cherry Creek Mortgage, LLC, NMLS 3001