FHA Loans for Borrowers Between Jobs?
These details are used to help the lender get an idea of your dependability as an employee, which may or may not translate into how you would be as a credit risk--how long you've lasted at any given company, your salary history, and how often you've changed jobs.
This data is not accepted at face value by the lender; the FHA requires the loan officer to verify sources of income and other details. This insures the data provided by the borrower is accurate (or becomes more accurate after the information is verified) and insures the lender treats each application as unique and doesn't try to shoehorn every application into the same general qualifying criteria.
One reason for such an involved process includes the fact that some borrowers may apply for an FHA loan while in transition from one job to another--how would the lender view "future income" or projected earnings when a new job hasn't begun? If only one "across the board" qualifying circumstance or set of circumstances applied to all borrowers, the in-transition loan applicant would probably be out of luck.
Can a borrower list employment from a job that hasn't started yet as "effective income" on an FHA mortgage loan application? According to FHA rules, "Projected or hypothetical income is not acceptable for qualifying purposes." But there are exceptions to the rule.
For example, according to the FHA, money from raises, annual bonuses, and cost-of-living style pay increases can and should be used as verifiable or effective income. This is permitted if the income is verified (in writing) by the employer AND are due to be paid within 60 days of the loan closing.
For borrowers who will have income from a new job, the rules say, "If a borrower is about to start a new job and has a guaranteed, non-revocable contract for employment that will begin within 60 days of loan closing, the income is acceptable for qualifying purposes."
Additionally, the lender must also be furnished proof that the borrower is able to pay an FHA mortgage bill each month between the time the loan closes and the new job starts--that would mean proving the applicant has cash reserves or other means of paying the mortgage in the meantime.
Specifically, FHA rules on this issue state, "The lender also must verify that the borrower will have sufficient income or cash reserves to support the mortgage payments and any other obligations during the interim between loan closing and the start of employment. (This condition may be appropriate for situations such as teachers whose contracts will begin with the new school year, or physicians who will begin residency after the loan is scheduled to close.)"
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