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Part-Time Employment Income for Income on an FHA Mortgage Loan

November 19th, 2014 by [shareaholic app="share_buttons" id="27157108"]
FHA loan rules include a requirement that the lender verify sources of income and employment. Some types of income may or may not be permitted on the FHA loan application, and FHA loan rules printed in HUD 4155.1 explain what’s permitted or not allowed.

One area some borrowers may be concerned with in this area is part time income. Does the FHA allow a lender to verify and count as income the earnings from a part-time job? The rules for this are found in Chapter Four Section D of HUD 4155.1 under the heading “Salary, Wage, And Other Forms Of Income”. It says:

“Part-time and seasonal income can be used to qualify the borrower if the lender documents that the borrower has worked the part-time job uninterrupted for the past two years, and plans to continue. Many low and moderate income families rely on part-time and seasonal income for day to day needs, and lenders should not restrict consideration of such income when qualifying these borrowers.”
Note the emphasis on both part-time and seasonal income. That’s an important thing to know for affected borrowers who derive significant income from a seasonal position. Chapter Four also tells the lender, “Part-time income received for less than two years may be included as effective income, provided that the lender justifies and documents that the income is likely to continue.”

What does the FHA consider “part-time”? Chapter Four states, “For qualifying purposes, ‘part-time’ income refers to employment taken to supplement the borrower’s income from regular employment; part- time employment is not a primary job and it is worked less than 40 hours.”

Chapter Four has instructions for the lender about part time or seasonal income that does not live up to the rules, stating:

“Part-time income not meeting the qualifying requirements may be considered as a compensating factor only.” That can help some borrowers, but not others. Discuss your specific situation with a loan officer to learn what your part-time income might be able to do for your chances at FHA loan approval.

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