Wednesday, September 11, 2013

Mortgage Broker Question-Part Time Income...Can We Use It?

Part Time Income…can we use it?

Mortgage brokers get that question a lot.

Can a borrower use part time income? There are several rules that pertain to this.

Scenario 1: You have 1 part time job.
In general banks do not like this scenario. BUT…If you have had the same part time job for 2+ years and the income is stable some banks will look at your overall credit file and may make an exception to use this income. IE if you have lots of money saved up as reserves and an excellent credit score.

Scenario 2: You have a full time job AND a part time job.
Banks will use your part time income in addition to your full time income ONLY if you have worked both jobs for 2+ years. Meaning for the past 2 years you’ve worked full time AND part time jobs at the same time. You can have switched part time and/or full time employers but the banks want to see that you can manage working 2 jobs for 2+ years.

So how is part time income calculated?

In most cases the banks will require a Verification Of Employment from your employer that details your last 2 year work history. Hours worked, pay scale, etc. Typically your total income will be averaged over 2 years. So if you made $20K part time in 2011 and $30K part time in 2012 the bank would say you average $25K a year in part time income. The exception to this rule is declining income. Meaning you made $30K part time in 2011 and $20K part time in 2012. In this scenario the bank would at most allot $20K a year for the part time income. If they see a continuing pattern of declining income via year to date pay stubs for 2013 for example…they may not allow ANY part time income or they may use the lowest number available to them (in this scenario they would average your 2013 income over 12 months).

Always talk to your mortgage professional if you are working part time before making an offer.
Feel free to contact Max Kallos at Liberty Home Mortgages with any mortgage related questions.