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How to Qualify For a W-2 FHA Income Only Mortgage Loan

W-2 FHA-Mortgage-Loan

W-2 FHA income only mortgage loan programs differ from the other loans in a way that you do not have to furbish documentations for supporting all of your income means. However, in order to be eligible for W-2 FHA mortgage loans, the applicant must be a W-2 salaried employee. Applicants who get commissions and bonuses might also be considered. But, the mortgage guidelines have become more stringent over the last few years and income verification is done after extreme scrutiny. Despite the fact that you are a W-2 salaried employee, the FHA, Freddie Mae, and Freddie Mac have stringent requirements for approving loan applications.
Analyzing whether you qualify for W-2 only mortgage loans may seem like easy as pie — you just have to calculate the gross salary from the base salary, right? But, that isn’t the case. Calculating whether an applicant qualifies for FHA Income only mortgage becomes complex for W2-wage earners if they are in the service industry, do seasonal work or have multiple jobs. W2-wage earners will have to show records of previous two years but there are leniencies shown in specific circumstances. Let’s see how you can qualify for W-2 FHA income only mortgage loans based upon your earnings by keeping different situations in mind.

How to Qualify For a W-2 FHA Income Only Mortgage Loan

Borrowers who have gaps in their employment can still qualify for this loan provided they find another job within a period of six months. The gap between the two jobs must not be greater than six months and of that is the case — the applicant will have to work in the other organization for at least another six months in order to qualify the mortgage application.

Part Time Job Converted to Full-Time Job Status and Promotions

Imagine a situation where a W-2 wage earner used to work in a company as a part time worker for the last couple of years or less than that but recently got promoted to a full-time status. At the time of mortgage underwriting, the borrower’s current status will be given a consideration for qualification of FHA mortgage loan. Similarly, if the employee has been promoted to a higher designation, then the mortgage underwriters will consider the new increased salary for income calculation and decision-making.

New Employment

If an applicant starts a new employment as a W-2 wage earner, then the base income of this job will be analyzed to approve FHA income mortgage loan. The bonus income that a newly employed borrower gets will not be used with the base income. However, the new employment will not get into effect unless the applicant starts working before closing. This can be problematic for relocating workers and the new income will be used in the following conditions:

  • The offer letter is not sufficient to qualify for FHA income only mortgage loan and additional documentation from the employer will be required. The employment contract must clearly indicate the base salary and the estimated bonus salary will not be considered.
  • The applicant must begin working at the new position before the first payment is due. And in majority of the cases, the borrowers must also get a paystub before the first loan payment is due.

Therefore, it is advisable that the applicant discuss their situation with a loan advisor before filling an application for FHA income only mortgage loan.

W2 Wage Earners Who Also Own Rental Property

Landlords who have a primary W2 jobs can also apply for a W2 FHA income only mortgage loan. But, in order to qualify for the mortgage, the borrowers must be aware of the fact that rental property losses will weigh down their prospects of loan approval. This is because the losses will measure against the income. So, if your property requires structural repairs and major construction transformations, qualifying for W2 FHA Income only loan will be difficult.

Multiple Jobs

When FHA is approving loan applications during the underwriting process, stability is given a huge consideration. Therefore, when people with multiple jobs are apply for FHA income only mortgage loan, the consistency is checked. The applicant must have worked at the multiple jobs for a period of two years at minimum for incomes from all the jobs to count in qualification process.

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