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Income from a New Job

November 20th, 2014 by [shareaholic app="share_buttons" id="27157108"]
Many FHA loan applicants want to know if taking a new job will affect their chances at FHA loan approval. FHA loan rules are designed to help guide loan officers through the qualification process for a variety of scenarios including those where the borrower may have “projected income” that could be factored into the borrower’s debt-to-income ratio.

What do FHA loan rules say about projected income? How is it defined? The answers to these questions and more can be found in HUD 4155.1 Chapter Four, Section E.

“Projected income is acceptable for qualifying purposes for a borrower scheduled to start a new job within 60 days of loan closing if there is a guaranteed, non-revocable contract for employment.”
That is simple enough–FHA loan rules allow for projected income when there is documented evidence and legally binding agreements between the borrower and employer. But the rules also require the lender to verify not only the income, but also the ability to afford the loan in the meantime.

From Chapter Four; “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.”

There are additional stipulations in Chapter Four–the projected income doesn’t help if the loan closes more than sixty days before the borrower begins his or her new employment. Chapter Four says as much:

“The loan is not eligible for endorsement if the loan closes more than 60 days before the borrower starts the new job. 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. Examples: A teacher whose contract begins with the new school year, or a physician beginning his/her residency fall into this category.”

There are situations where projected income can be used, and those where it is not, but it should also be noted that the lender may have additional requirements in this area above and beyond FHA loan rules. Check with your loan officer about your specific needs to get a better understanding of what might be possible.

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