Now that you're back to work…
Suddenly lots of folks have been calling about buying a house, now that they’re back in the workforce. Whether they’ve been on unemployment, or have changed jobs, here is what they’re learning about qualifying for their next mortgage.
The gold standard of loan qualifying has always been “two years on the current job.” That’s not as easy as it once was, given our current economy. What the lender is looking for is continuity of income, or the “ability” to repay your loan. Almost all lending today requires a review of your last two tax returns and your recent paystubs. Easy, if you’ve had your job for awhile.
If you’re new to your job after having been unemployed for no more than 30 days, you’re okay. If you were out for more than a month, lenders are looking for at least six months on your new job. Some are looking for an entire year before they will count your new income in qualifying.
Were you self-employed before? If you have gone to work for someone else’s company, expect at least a six-month wait before your income is seasoned. Be prepared to show that you are a “permanent” employee and that any probationary period has passed. Those employed under contract may need to evidence at least three years remaining on that contract.
Relocating to the area would be viewed as any of the above scenarios. If your job moved you here and you are still on the same payroll, that’s easy. It’s when you have a gap between the old job and the new that the waiting periods begin to apply.
If you have just started your own business, be prepared to show two full tax filings before your new income will be counted towards your loan. Too, if you earn commissions or bonus, you’ll need to show two year’s receipt of those monies before they count.
Three other areas of interest for qualifying income: Students new to the workforce usually need at least one year on the present job, showing school transcripts to go backwards for a full two year history.
For newly retired folks we can generally count retirement income right away, as long as it is scheduled to last for at least three years.
Remember that disability often does not count as qualifying income, unless you can show it’s been received for at least a year and has at least three years remaining. Many private disability plans fail to meet that test. Disability paid as social security income is usually counted without a problem.
The loss of stated income loan programs means toeing a very fine line these days. Before you contact a Realtor to look at homes, be sure you’ve had a frank discussion with your mortgage advisor to be sure you’ve got what it takes to be approved for your home loan.
Tammy Engel, Mortgage Advisor is the only Certified Mortgage Planning Specialist in Kern County. Contact her at 661/822-REAL with your home financing questions, or visit http://www.TammyEngel.com to see what past clients have to say about working with her.