October 23, 2015
We’ve been examining FHA loan rules for income verification including requirements for full-time and part-time employment. But some FHA loan applicants have unique jobs that keep them employed on a seasonal basis. Does the FHA loan rulebook, HUD 4000.1, have provisions for these types of soon-to-be homeowners, too?
According to the rules, participating FHA lenders may verify seasonal employment if it meets certain FHA standards. HUD 4000.1, Section II Part A includes the following, starting with a definition of “seasonal employment” as acceptable to the FHA:
“Seasonal Employment refers to employment that is not year round, regardless of the number of hours per week the Borrower works on the job.”
The FHA instructs the lender, “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 lender is required to examine the last 24 months of the borrower’s work history. “For employees with Employment Income from Seasonal Employment, the Mortgagee must average the income earned over the previous two full years to calculate Effective Income.”
Another important factor in seasonal work is unemployment compensation, which some may draw between seasonal hires. Does the FHA allow unemployment to be considered as “effective income” in such cases? According to HUD 4000.1, “The Mortgagee may consider unemployment income as Effective Income for those with Effective Income from Seasonal Employment.”
This requires the lender to document the nature and duration of the unemployment payments. “For seasonal employees with unemployment income, the Mortgagee must document the unemployment income for two full years and there must be reasonable assurance that this income will continue.”
Do you work in residential real estate? You should know about the free tool offered by FHA.com. It is designed especially for real estate websites–a widget that displays FHA loan limits for the counties serviced by those sites.
It is simple to spend a few seconds customizing the state, counties, and widget size for the tool; you can copy the code and paste it into your website with ease. Get yours today:
http://www.fha.com/fha_loan_limits_widget
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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