Part-Time Job Compensating Factor?

[Anonymous]

I have a PT job that I have held for a little over a year now.  I read that that a PT job less than 2 years is seen as a compensating factor for FHA loans...what does this mean?  My soon to be husband and I earn about $65K a year from our FT incomes.  Our monthly debt payments total about $1100 (car, SLs, CCs) a month or about 20% DTI.  My PT income generates about $15K a year.  We ideally want to purchase a home in the $160K-$175K price range and we have about $1500 currently saved but by the time we apply in 3 months or so, that should be about $2500.  We have a perfect rental history of on time payments for the past 4+ years that we can document with checks.  All of our income is documented on W2s. Our scores are all in the low 600s.  What are our chances for a home loan approval in this price range?  Would or how would my PT income be considered in this whole picture?  We really want to purchase a house by the beginning of next year (moving into the home in early January)...I would appreciate any advice or input.  Thanks.

[DallasLoanGuy]

the part time income will not be a factor at all. you must have 2yrs of PT income to be considered.... and then it would be income..... not a compensating factor.

i hesitated to copy the guidelines.... because people tend to read into it what they want to see.

but below is from the fha handbook.

an underwriter using part time income of 12 months will not be an fha underwriter for long.

2-13 COMPENSATING FACTORS

. Compensating factors that may be

used to justify approval of mortgage loans with ratios exceeding our benchmark

guidelines are those listed below. Underwriters must record on the "remarks"

section of the HUD 92900-WS/HUD 92900-PUR the compensating factor(s) used to

support loan approval. Any compensating factor used to justify mortgage approval

must be supported by documentation.

A. The borrower has successfully demonstrated the ability to pay housing

expenses equal to or greater than the proposed monthly housing expense for the

new mortgage over the past 12-24 months.

B. The borrower makes a large downpayment (ten percent or more) toward the

purchase of the property.

C. The borrower has demonstrated an ability to accumulate savings and a

conservative attitude toward the use of credit.

D. Previous credit history shows that the borrower has the ability to devote a

greater portion of income to housing expenses.

E. The borrower receives documented compensation or income not reflected in

effective income, but directly affecting the ability to pay the mortgage, including food

stamps and similar public benefits.

F. There is only a minimal increase in the borrower's housing expense.

The borrower has substantial documented cash reserves (at least three months’

worth) after closing. In determining if an asset can be included as cash reserves or

cash to close, the lender must judge whether or not the asset is liquid or readily

convertible to cash and can be done so absent retirement or job termination. Also

see paragraph 2-10K.

Funds borrowed against these accounts may be used for loan closing, but are

not to be considered as cash reserves. “Assets” such as equity in other properties

and the proceeds from a cash-out refinance are not to be considered as cash

reserves. Similarly, funds from gifts from any source are not to be included as cash

reserves.

H. The borrower has substantial non-taxable income (if no adjustment was made

previously in the ratio computations).

I. The borrower has a potential for increased earnings, as indicated by job

training or education in the borrower's profession.

J. The home is being purchased as a result of relocation of the primary wageearner,

and the secondary wage-earner has an established history of employment, is

expected to return to work, and reasonable prospects exist for securing employment

in a similar occupation in the new area. The underwriter must document the

availability of such possible employment.