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When Making More Money Won't Help You Buy a Home

Scott Sheldon

You have a great credit score, manageable debts, solid income, cash ready to go, but you still can’t get a mortgage. You even have a second job – shouldn’t that help you?  Not necessarily. A lender may not allow the use of the income you generate from your second job unless you meet certain criteria. If you want a lender to count your second-job income, you need to 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.

The 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 past four months you’ve taken on a second job as a nurse for a separate hospital and you generate an additional $2,000 per month in income at the second job – but you have no history of having a second job before. 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 past 24 months.
  • Need not be in the same field, the 24-month history supersedes any ‘same field’ requirement.
  • Cannot have any job gaps within the past 24 months of 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 answering any credit-related questions when it comes time for a final underwriting decision. The underwriter’s sole focus, as the decision-maker, is mitigating risk for the lender, and as such, they are the final signoff person in being able to use your second job income when you apply 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 past 24 months, this reduces the possible risk of this income going away in the future.

The Same-Field Threshold

Taking the nurse example we used, it’s customary within the health care 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 has gone on for less than 24 months, the additional income cannot be counted. If it has been 24 months or longer, the income can be counted. Whether it’s in the same field does not matter, so long as the secondary job source shows the pattern of manageability.

What Happens With a 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 24 months. Let’s say you’ve had a $15-an-hour part-time job for the past 16 months, but for the most recent 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 a salaried position arise after the job gap, however, the full wages would be considered without averaging.

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