February 28, 2020
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Real Estate & Business

Scott Sheldon
Changing income and job status may affect mortgage chances
December 27, 2019

Securing mortgage loan financing requires an ample credit score, enough equity and/or down payment, but it also requires income. You must have documented proof of income as well as a two-year work history to qualify for nearly every mortgage loan program.

The following scenarios could be particularly beneficial or problematic depending on your financial situation.

If you are a W-2 employee from a company that you do not own that’s considered a positive so long as you have the two years’ work history (or education in lieu of the work history).

If however you are a W-2 employee from a company that you do not own and now you started a business and it’s in the same field you have to have at least 12 months of income identified on a tax return to use that income in order to qualify. If you have less than 12 months because you started your business, for example, mid-year, that’s generally not going to be acceptable because you must have 12 months of documented income on a tax return to use that income meaning you’d have to wait for an entirely new year in order to qualify if you remain self-employed.

Working two jobs? You must have two years’ history of working two jobs simultaneously in order to use both incomes for both jobs in order to qualify whether you’re looking at an FHA loan or whether you’re looking at a Conventional loan. You’re hearing that right, a brand-new second job, even though it’s income that can help you pay off debt or save money, will not help for income to offset a mortgage payment. In such a situation you would need a co-signer in lieu of using the second job income.

If you were working out of the country and/or you are a new citizen of the United States or you’re here on a work visa the same thing applies: you’re still going to need a 2-year work history working in the United States in order to qualify.

If you were previously self-employed and now you have a brand-new W-2 job you’re in the clear. To be clear it must be a brand-new bonafide legitimate W-2 job from a company that you do not own. If you are a W-2 employee and you pay yourself a salary from the company that you own that potentially could be problematic unless you’ve been filing self-employed for the most recent last five years at which point mortgage underwriting would only need one year of income tax returns in order to qualify. Yes, you can provide only one year if income tax returns filing self-employed so long as you have been filing self-employed for the most recent last five years.

If for example, you own the company from which you are earning wages and you’re bleeding your company dry in order to pay yourself a salary that’s going to be problematic especially if your 100 percent owner of the business.

Two caveats to this rule:

Your spouse is an employee of the company

You own less than 20 percent of the company

Hint: if you’re an owner of the company and you own less than 20 percent of the business and you get paid wages as a W-2 employee that income counts. Since the ownership is less than 20 percent the rule applies, you can bypass the need to provide additional tax returns so if you are losing money from a tax standpoint you can potentially still qualify as long as you have the W-2s and supporting pay stubs of the income needed to offset a mortgage payment.

The ways to offset not having enough income:

Put more money down

Pay off debt even if the debt is 0 percent interest- that is always a possibility

Get a cosigner

Change mortgage loan programs

Buy a less expensive house

If your situation requires anything unique or out of the ordinary it’s always good to talk to a lender who has the experience and knows what underwriting is looking for at the beginning of the process so they can best structure your loan in a way that will meet the requirements of the loan while putting you and your family into a program that you can afford.


Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at