October 16, 2019

Vimeo Channel YouTube Channel

Articles Tagged With: Commission Income

FHA Loan Appraisal Issues: Environmental Concerns

Are There Any Income Documentation Rules For FHA Loans? Part Two

Are there any income documentation rules for FHA loans? We have been examining this question, referring to the FHA loan handbook (HUD 4000.1) to see what the lender must do when reviewing a borrower’s income. The lender must calculate the applicant’s debt-to-income ratio using only verifiable income, and there are specific procedures your loan officer must use to do this. Those procedures can vary depending on the nature of your income. Are you salaried, hourly, commission, or contract? Depending on your payment arrangements, the lender must calculate the income accordingly. FHA Loan Applicants With Hourly Income HUD 40001. tells the lender that for hourly income, the loan officer must determine whether the hours of employment vary or not. If they do not vary, the lender can use the current rate | more...

 
Home Renovation With An FHA Loan

Are There Any Income Documentation Rules For FHA Loans?

Are there any income documentation rules for FHA loans? That is what some borrowers want to know when they are ready to fill out a mortgage loan application. What does your FHA lender need to know about your income and employment? The FHA Lender Is Required To Document Your Employment And Income In the FHA loan handbook, HUD 4000.1, your FHA loan officer is instructed to document two years of employment, though that two years is not necessarily required to be with the same company or in the same job position. The lender wants to know your income history, whether you have gotten any raises, or whether recent job changes have resulted in a benefit to you income-wise. FHA Loan Rules Require Independent Verification Of Your Income This means that | more...

 
Can I buy a manufactured home with an FHA loan?

Commission Income and FHA Loans: A Reader Question

A reader asked about the FHA loan rules governing commission income this week in our comments section: “My employer recently (1yr) switched the pay scale to a base/commission/bonus format. Basically we now get paid per load instead of hourly. Since weve only received commission for 2016 and not 2015, should my itemized job related expenses for 2015 count against my income over the previous two years?” FHA loan rules in HUD 4000.1 address this issue, but may not be the only rules at work-lender standards would also apply as well as any applicable state law. Here’s what HUD 4000.1 states about commission income: “The Mortgagee must calculate Effective Income for commission by using the lesser of (a) the average net Commission Income earned over the previous two years, or the | more...

 
Who can apply for an FHA mortgage?

Commission Income and FHA Loans: A Reader Question

How does commission income count when applying for an FHA mortgage? A reader asked us recently, “I was denied a mortgage because of a commissioned salary, even though Im full time and am guaranteed 15.75/hr. Interestingly, everything was all ready to go on my measly 12/hour salary before I got this better job. Now Im thinking that may have been a mistake on the part of the lender…” FHA loan rules governing this type of income (as verifiable income that is stable and likely to continue) are found in HUD 4000.1. The reader question does not state as much, but it seems implied that the commission income situation is recent. If so, the lender may need the borrower to have more time on the job as an employee earning commissions | more...

 
Will FHA Loans Let Me Rent Out My Home?

Commission Income and FHA Loans

A reader asks, “Can I apply for an FHA loan after just one year of commission based pay with a cosigner?” FHA loan rules require all borrowers to be obligated on the loan to financially qualify, which would include verification of both employment and income. A co-signer or co-borrower may not be able to make up for financial shortcomings of the other borrower(s) on the mortgage loan, but lender standards would apply in this area and it’s best to have a conversation with a loan officer about those standards and what may be possible. FHA loan rules for commission income, found in HUD 4000.1, state the following: “Commission Income refers to income that is paid contingent upon the conducting of a business transaction or the performance of a service…The Mortgagee | more...

 
FHA Loan Credit Score

FHA Loan Questions: Switching To Commission Income

A reader got in touch with us to ask a question about how the FHA views commission income. This question came in response to an older blog post from 2013, well before the FHA and HUD switched over to the new FHA loan rulebook, HUD 4000.1: “I have currently been employed with the same company and same job title for 7 years, I have the opportunity to switch from an hourly wage to a commission percentage but still keep my same job at the same place.I will make a lot more. How will switching to commission affect my approval for a home mortgage? I plan on buying next year maybe a little sooner.” FHA loan rules for verification of commission income are clear. HUD 4000.1 starts off by defining commissions | more...

 

FHA Loan Income Questions: Commissions

There are lots of questions about FHA loan income standards–especially where commission income is concerned. Here’s one of the latest reader questions from the comments section, asking about FHA loan income rules for commissions–the reader has a job that “… pays 60% income from salary and 40% from commissions now and am being recruited to another company same industry, same job title and scope of work but better pay. A slight increase in salary and commissions with the new company recruiting me, but same type of ratio 60% salary 40% commissions.” “I have been in the same job title for 2+ year now. Can FHA or an underwriter use my new income with new higher commissions at the new company for a loan? Or do I have to wait for | more...

 

FHA Loan Income Requirements: A Commission Question

We recently got a question regarding commission income and how it may be reviewed by the lender. More specifically, the question is about whether the nature of the reader’s income is truly “commission income” and how the lender might view that on the FHA loan application. The reader asks: “On my pay stub next to earnings it says commission, but this actually isnt true commission pay. We arent selling anything, we deliver to stores. Its just how my company decided to pay us. So my question is do I fall under this category of commission based salary, where I would need a year of income or would that not matter in my case?” Unfortunately, the answer to this question would come from the lender. The loan officer’s job is to | more...

 

FHA Loan Rules For Commission Income: A Reader Question

A reader asks, “With commission income can a person be at one job for about a year and then move to a different employer but same line of work and still commission type pay and be there for a year qualify? Can the 2 years be from different employers?” This scenario would be handled on a case-by-case basis by the lender for several important reasons. The lender will need to determine if the commission income is likely to continue, for starters, and also insure that the amount of commissions has not decreased. FHA loan rules in HUD 4155.1 state: “Commission income showing a decrease from one year to the next requires significant compensating factors before a borrower can be approved for the loan. A borrower whose commission income was received | more...

 

FHA Loan Rules For Commission Income: Another Reader Question

A reader asks, “What if a person went from a commission based job as a loan officer to a salary plus commission job as a Mortgage Loan Manager? Would the salary still be averaged over 2 years?” This question is in reference to an earlier post we did back in 2013, which was titled, “FHA Loans and Commission Income: A Reader Question”. In that blog post, we answered a reader who asked us, “Is it true that if you work in a job where your pay is based on commission you have to be with your current employer for at least one year to obtain a FHA loan, even if your prior job was in the same line of work and was also a commission paying job?” The answer we | more...