Documenting work history and compensation:
There is no hard and fast answer to this question, and other lenders may have different requirements. Even the loan type you select could impact these requirements. Let’s detail a few of the requirements.
1. How is your compensation structured? If you earn 100% salary it’s easy for an underwriter to calculate and predict your income in the future. However, if you derive a substantial part of your earnings from bonus or commissions, you’ll have to be able to show a history of this kind of income for it to be counted in your debt-to-income ratios. If 25% or more of your income is commission or bonuses, you are considered self-employed as far as underwriters are concerned. Like the self-employed, you’ll need at least a two year history of this compensation to get credit for it (Please Note: that doesn’t mean that you are required to be at the same company but you do have to have worked in the same capacity and in the same industry).
2. How long have you worked in that field? Your history with a specific company is less important than your experience in the field. If you have been a CPA for decades, it matters less that you are now at ABC Company instead of XYZ Industries.
3. How is your contract structured? We’ve gotten people approved for loans when they had new jobs that they had not even started yet. In one case, the applicant was a new college football coach who had a guaranteed five year contract and a ten year history of coaching college-level sports.
4. What are your prospects? Just out of college and working your first job? That may not be a problem if you are in the right field and with the right credentials. For example, a medical school graduate with a hospital job or a new lawyer working for the state government.
5. How’s your overall pattern? People with new jobs who demonstrate a pattern of repeated job changes with no advancement have a much harder time getting approved for mortgages. In addition, those in troubled industries will have challenges too. Underwriters are tasked with determining the likelihood of you remaining employed as part of your income analysis.
6. What are your compensating factors? These are any items that help overcome a recent job change. Your wife or husband’s employment is one of them. Others include excellent credit, assets (enough to pay your bills for several months if you were to lose your job), and a solid debt-to-income ratio.
Job history requirements recapped:
2 years of steady job history in the same line of work.
2 year requirement may be waived if you have recently graduated from college.
Self-employed or commissioned jobs need 2 years of completed tax returns.
A 2 year history of a part-time job must be verified before income can be used toward qualification.
*Occasional overtime is not typically counted as regular income.
Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our low rate guarantee!
Disclaimer: The information contained in this article has been prepared by an independent third party and is distributed to consumers for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Skyline Home Loans. Please consult with a licensed loan officer for expert advice regarding financing or refinancing home.