The One Date on an FHA File That Decides Whether Your New Job Counts as Income
Aaron, a fictional buyer outside Cottageville, SC, found out that one date on an FHA file decides whether his new job counts as income. It is not closing day, and it is not the day he gets the keys. Plenty of buyers coming back from a break in work never hear which date it is, and that is the date worth knowing before you apply.
Meet Aaron
Aaron is an illustrative character, not a real client. His situation comes up often. He stepped away from work for six months or more. Now he is working again in his current line of work, and he wants to buy a home with an FHA loan. His worry is simple: will the gap in his employment history count against him, and will his new paycheck count at all?
What the FHA guideline says
The answer sits in the FHA guideline, Section II.A.4.c.xi.B, on gaps in employment. Here is the text word for word:
"For Borrowers with gaps in employment of six months or more (an extended absence), the Mortgagee may consider the Borrower's current income as Effective Income if it can verify and document that: the Borrower has been employed in the current line of work for at least six months at the time of case number assignment; and a two-year work history prior to the absence"
Read it slowly. It does not say a gap ends the conversation. It says the lender may consider your current income, and it sets two conditions.
The two conditions
The first condition is time in your current line of work. You need at least six months of employment in that line of work, measured at the time of case number assignment. The second condition is history before the absence. The lender needs to verify and document a two-year work history prior to the gap.
Notice the words verify and document. It is not enough for you to say you worked somewhere. The lender has to be able to support it with documents in the file.
The date that matters
The clock for the six months runs from your start date in your current line of work to case number assignment. That is the date Aaron was missing. He had been counting toward closing, which is later in the process. The guideline measures at case number assignment, which is an earlier step.
That changes how you plan. If you are close to the six-month mark, the timing of when a case number would be assigned matters. Your loan officer is the person who can tell you where you stand and how the timing would work on your file.
What Aaron does today
First, he writes down his exact start date in his current line of work and counts the months from it. Second, he thinks through where he worked before the absence, because the lender will need to verify two years of work history prior to the gap. Third, he asks his loan officer one clear question:
"I had a gap in employment of six months or more. Can you count the months from my start date in my current line of work to the date a case number would be assigned, and tell me which documents you'll use to verify my two-year work history before the gap?"
That question does two jobs. It gets a real count of the months against the date that matters, and it makes the lender name the documents instead of leaving you to guess.
A fair note on expectations
The guideline says the lender may consider your current income if the conditions are met. It is not a promise of approval. Credit, assets, the property and the rest of the file still matter. What the guideline does is tell you which two items to line up first.
Where I come in
I am Jason Sharon, a licensed mortgage broker, and my approach is to find the path. If you have been away from work for six months or more and you are back in your current line of work, call me at 843-LOW-RATE. We will count the months together, look at the work history before the gap, and see where your file stands.
Home Loans Inc - Jason Sharon, Mortgage Broker. Company NMLS #1728740, Jason Sharon NMLS #1281448. Equal Housing Opportunity.
Learn more about this loan program: The One Date on an FHA File That Decides Whether Your New Job Counts as Income
