Hourly Wage Jobs: Mortgage Approval Considerations

Getting a mortgage can be a complex process, and lenders will assess a range of factors to determine eligibility. Lenders will evaluate an applicant's income level, work history, and job type. For those with hourly wage jobs, lenders will want to verify the hourly wage and the number of hours worked. This can be done by providing pay stubs and W-2 forms. If hours are inconsistent, lenders will often average the income over the last few years to estimate eligibility. Lenders are looking for consistency in income and employment history, and any gaps in employment or recent job changes may negatively impact mortgage approval.

Lenders prefer salaried employees

Lenders want to see that you have a stable income and a good credit score, which will assure them that you will be able to make your mortgage payments. They will also want to see that you have made progress in your career, which indicates a higher salary and a solid work ethic.

Salaried employees are often preferred by lenders because their income is more stable and predictable. Their monthly income is calculated by dividing their annual gross income by 12. However, for those who are paid an hourly wage, the process is more complex. Lenders will want to verify both the hourly wage and the number of hours worked. If you have inconsistent hours or make overtime pay, the lender will average your income over the last few years to get a better estimate. This can be done by providing pay stubs and previous W-2 forms.

If you are a salaried employee with a stable income, your lender may only need to verify your position and salary with your employer. However, if you are an hourly wage earner, the lender may also want to review additional documentation, such as letters of explanation or statements regarding the likely continuance of your income.

While it is more challenging to get a mortgage as an hourly wage worker, it is not impossible. Lenders understand that not all income sources are the same, and they are willing to work with borrowers to verify their income and employment status. It is important to be transparent with your lender and provide as much documentation as possible to increase your chances of approval.

Lenders value consistency

Lenders want to be sure that you'll be able to comfortably pay your mortgage now and in the future. They do this by examining your job history, current employment, and income over the past two years. They also evaluate your finances and the likelihood that you can repay the loan on time.

If you are self-employed, your income can fluctuate greatly depending on the business and the timeframe. Lenders will typically look at your gross (pre-tax) income, minus any expenses, losses, deductions, etc. They will also consider any other forms of income you may have, including investments, rental properties, and retirement accounts. To prove your income, you will need to provide two years of tax returns, bank statements, and business records.

Lenders also value consistency in your employment history. They may be hesitant to approve your mortgage if you have recently changed jobs or have jumped around between many different jobs and industries. However, a job change is not necessarily a bad thing, especially if you remain in the same line of work and your salary is equal to or greater than what you made previously.

Employment history is key

Lenders typically like to see a two-year history in your current job position. They will want to verify your income over the past two years, and this can be achieved by providing pay stubs, W-2s, tax returns, and other financial documentation. If you work a part-time job or seasonal work, you may not need to show a two-year work history, but you will still need to provide evidence of a long-term flow of income.

If you are an hourly wage employee, your income may be averaged over the last few years to get a better estimate, especially if your hours are inconsistent or you make overtime pay. Lenders will want to verify both your hourly wage and the number of hours worked. It is important to note that erratic work hours or recent job changes can harm your income calculation.

Additionally, if you have changed jobs or industries, it is important to approach the mortgage process carefully. Lenders will want to understand the reasons for the change and may request additional documentation, such as a letter from your employer explaining the change in pay structure or job title. They will also want to see that your income is steady or trending upward.

In summary, employment history plays a crucial role in mortgage approval. Lenders will assess your work history, income level, and income stability to determine your ability to make mortgage payments. Providing comprehensive documentation and maintaining a consistent income will increase your chances of mortgage approval.

Income stability is important

Lenders will typically look at your income over the past two years to determine your stability. They will consider your gross (pre-tax) income, minus any expenses, losses, deductions, etc. They will also take into account your overall work history, even if you have recently changed jobs. Maintaining consistent income is crucial, especially if you are self-employed or have variable income.

If you are an hourly wage worker, your lender will want to verify both your hourly wage and the number of hours you work. This can be done by providing pay stubs and previous W-2s. If your hours are inconsistent or you make overtime pay, your lender will likely average your income over the last few years to get a better estimate.

It is important to note that income from a second job or other sources, such as retirement distributions, permanent disability, child support, or alimony, can also be considered by lenders. However, you must provide documented proof that this income will continue into the foreseeable future.

In addition to income stability, lenders will also consider your debt-to-income (DTI) ratio, credit score, and other factors when determining your eligibility for a mortgage.

Gaps in employment can be explained

Lenders are looking for consistency and stability in income, and they will evaluate your income level. They will want to see that you can be counted on to bring in a consistent income to cover your mortgage payments. They will also want to reduce the risk of default. This is why a stable two-year history of employment is important, although this does not have to be continuous or with the same employer. It is possible to get a mortgage with a part-time job, seasonal work, or unemployment income, but you will need to prove a long-term flow of income.

If you have jumped around between different jobs and industries, this may be a red flag for lenders. However, if you have worked in the same field that you studied, your education may count as a two-year job history. If you have had gaps in the past two years, lenders are most concerned by unemployment periods of six months or more. If you were out of work for just a month or two, there may not be an issue with your mortgage approval.

Frequently asked questions