Is it possible to be approved for an FHA home loan using part-time employment income? There are indeed FHA loan rules for this type of income and instructions to the lender for how it is to be reviewed.
HUD 4000.1, the FHA home loan handbook, states that all verifiable income must meet certain FHA minimum requirements including the ability to verify two years of employment (not necessarily with the same employer).
One area some borrowers may be concerned with in this area is part-time income. Does the FHA allow a lender to verify and count as income the earnings from a part-time job? The rules for this are found on page 200 of HUD 4000.1, which begins by defining what the FHA considers part-time income:
“Part-Time Employment refers to employment that is not the Borrower’s primary employment and is generally performed for less than 40 hours per week.”
And what does HUD 4000.1 instruct the lender on handing this type of income?
“The Mortgagee may use Employment Income from Part-Time Employment as Effective Income if the Borrower has worked a part-time job uninterrupted for the past two years and the current position is reasonably likely to continue.”
In addition to part-time work, there is also seasonal employment. FHA loan rules address income from that type of job as well:
“The Mortgagee may consider Employment Income from Seasonal Employment as Effective Income if the Borrower has worked the same line of work for the past two years and is reasonably likely to be rehired for the next season. The Mortgagee may consider unemployment income as Effective Income for those with Effective Income from Seasonal Employment.”
Note the emphasis on the income being “likely to continue”. This is a common theme in the rules governing income sources and borrowers should expect questions about income that does not seem to meet the “likely to continue” expectation. Is there a chance the income could continue? Can the employer verify that possibility?
Borrowers should expect to provide documentation for the lender, especially when there is unemployment compensation provided in the gaps between seasons. Part-time work is not automatically a “problem” when applying for an FHA home loan, but the borrower should expect to provide supporting documentation to show how consistently available the income is.