A Guide to Navigating Non-Traditional Income Paths (Gig work)
Today, we're going to tackle a modern challenge: how to make non-traditional income streams count when trying to secure a mortgage. Whether you’re working part-time gigs, diving into the ever-evolving gig economy, or engaging in seasonal work, this article's got your back.
Decoding the Income Jigsaw Puzzle Before diving deep, let's break down the types of income we're talking about:
Part-Time Job: These aren't your regular 9-5s. They offer fewer hours, and while they might not be your main gig, they're still significant.
Gig Job: Here, we're talking about roles like being a Lyft driver, managing a bustling Etsy shop, or even taking photographs on the side.
Secondary Employment: Are you juggling two jobs at once? Then this is where you fall. It may not be a full time second job, but it is consistent and needed.
Seasonal Work: This is for those who have jobs related to particular seasons, like ski instructors in winter or lifeguards in summer.
Understanding Mortgage Heavyweights There are five big names in mortgages to familiarize yourself with: Fannie Mae, Freddie Mac, FHA, VA, and USDA. They each have their rulebook. Knowing their views on non-traditional incomes is your secret weapon. Although each are similar, they are also different in how they treat or evaluate your extra income.
Diving Deeper into Fannie Mae's Perspective
While Fannie Mae is just one of the big mortgage agencies, understanding its criteria can give you a clearer picture:
They like consistency. So, a two-year record of your part-time or secondary job is a good sign.
The fewer gaps in employment, the better. Try to have no work breaks longer than 30 days in the past year.
Multiple employers are okay as long as you've been continuously working.
If your part-time role complements your full-time one, that's a gold star for you.
Sometimes, they can be flexible. A 12-24 month work history might work if other factors are in your favor.
Freddie Mac, FHA, VA & USDA - How They Fit In Each of these agencies has its nuances. For the nitty-gritty, I recommend checking out our detailed video. But a common thread across them all? They value stability and reliability.
Behind the Scenes: Underwriters & Lenders Mortgages are not just about checking the right boxes. Underwriters, those who decide on your mortgage approval, take a lot into consideration. Their judgment plays a big role into issuing your approval, but they will use guidelines from each of the five loan programs to evaluate things like your credit score, job stability, credit history, monies in reserves and banking history. If an underwriter fails to make the right decision and approves a loan that should not have been approved, they could receive a poor remark on their chums report and possible be let go by the lender.
Additionally, individual lenders might add their own layers of requirements. Known as lender overlays, these can be stricter than standard guidelines. Lenders will do this to ensure they stay within good standing with their investors and the agencies that will purchase the your loan once it closes. Higher standards means it is less likely the lender will need to purchase the loan back from an agency should it fail the agencies audit test.
Golden Nuggets to Keep Handy
Remember, each lender is unique and is willing to accept more or less risk. What works for one might not for another.
Don't be caught off guard by lender-specific rules.
Always, always reach out for guidance when in doubt. The mortgage world can be a confusing place, but with the right map and guide, you'll find your way.
Securing a mortgage with unconventional income sources might feel like an uphill battle, but with the right knowledge and strategy, it's absolutely achievable. Stay informed, gather your documents, and never hesitate to ask questions. Your dream home is closer than you think!