|Why second job may not cut it for a mortgage
You have a great credit score, manageable debts, solid income and even have cash ready to go, but you still can’t get a mortgage. You want a lender to count your second job income? Know these lending stipulations…
How lenders classify second job income
A second job is usually classified as an additional income when qualifying a consumer for a mortgage. A lender will give the most importance to the consumer’s main job, as that is considered to be the anchor income in determining financial stability.
Facts about using a secondary income source:
• Cannot be used if the second job is brand-new, even if it is in the same field. Let’s say, for example, you’re a nurse at one particular hospital. In the last four months you’ve taken on a second job with no history of having a second job before the past as a nurse for a separate hospital, and you generate an additional $2,000 per month in income at the second job. Even though it’s in the same field, it will not be counted.
• Can be counted so long as there is a history of working a second job.
• Can be counted with two-year work history demonstrating an ability to manage two jobs side-by-side for the most recent last 24 months.
• Need not be in the same field, as the 24-month history supersedes any “same field” requirement.
• Cannot have any job gaps within the last 24 months more than 30 days. A job gap will cause the lender to have to average your income.
The two-year history threshold
Lenders are particularly interested in making sure to be able TO answer any credit-related questions when it comes time for a final decision from underwriting. Understand the lender’s underwriter (decision-maker), their sole focus is to mitigate risk for the lender, and as such, they are the final sign-off person in being able to use your second job income when applying for a mortgage. The two-year history requirement is in place to prevent any possible question of fraud or misrepresentations or getting a job solely for the purposes of qualifying. If the consumer has a two-year work history and has demonstrated an ability to maintain a second job for the most recent last 24 months, this reduces risk possibility of this income going away in the future.
Same field threshold
Taking the nurse example we used, it’s customary within the healthcare profession for a registered nurse to work full-time simultaneously at two separate hospitals, part of the week at one hospital, part of the week at the other hospital. If, however, this arrangement is under 24 months, the additional income cannot be counted. If it has been 24 months or longer, then the income can be counted. The same field does matter so long as the secondary job source shows the pattern of manageability.
Averaged income due to job gap
If the jobs you’ve held in the previous 24 months have job gaps longer than 30 days and the jobs are hourly, your income will be averaged over the most recent last 24 months. Let’s say you’ve had a $15 an hour part-time job for the most recent last 16 months, but for the most recent last three months, your new hourly rate of pay at your new job is $20 per hour. The lender will still average the income and will not take into consideration your new higher hourly rate of pay, as the hourly is considered inconsistent due to the five month gap. Should salaried position arise after job gap, full wages would be considered without averaging.
Scott Sheldon is a local mortgage lender, with over six years of experience helping people purchase and refinance primary residences, second homes and investment properties. Visit him at www.sonomacountymortgages.com.