Prospective buyers can look to land a VA home loan using part-time income. But you’ll typically need a solid track record of receiving that income to make it work.
Lenders want to get a good handle on the stability and reliability of all income, especially sources more susceptible to fluctuation, such as part-time income. Part-time employees often need a two-year history to count that income toward mortgage qualification. Guidelines and requirements can vary by lenders.
Some lenders won’t care if that two-year history is with the same employer or comes from multiple companies, as long as there are no gaps in employment and the work is consistent.
Approaches can also vary when it comes to actually calculating your income.
Calculating Part-Time Income
Lenders will take a close look at your total part-time income over the last couple of years. They’ll be on the lookout for signs that it’s increasing or decreasing, and they’ll often take a conservative approach with a focus on more recent earnings.
Again, every lender and every part-time income situation is different. Here’s a general example to help highlight how variable these can be.
Let’s say you’ve had the same part-time job for the last two years. If your income has been consistent, lenders might calculate your average monthly income using those past two years plus your current year-to-date income.
For example, if you’re looking to purchase in July, the lender might calculate an average based on your income over the last 30 months -- 24 months for those two full years plus the first six months of the current year.
Where things can start to get tricky is if your income hasn’t been consistent, namely if you’re making less money now than you were a year or two ago. In these cases, lenders might put much greater emphasis on your more recent earnings when calculating your average income.
And if your part-time income has really fallen sharply over the last couple of years, lenders might slam on the brakes entirely.
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Part-Time Income Exceptions
Even if you’re not ultimately able to count your part-time income as effective income toward a mortgage, it can still be a big help on the road to homeownership.
Some lenders may be willing to allow you or a co-borrower to offset certain debts using part-time income. In other words, lenders might not count your co-borrower’s part-time income, but they may be willing to use it to essentially cancel out some of their monthly installment debts. That can help keep your debt-to-income ratio and residual income figures in check.
Every employment and income situation is different, and lender guidelines and policies will vary. There may be exceptions or workarounds depending on the lender and your specific situation.
One example may be if a borrower transitions from full-time to part-time work with the same company. In that situation, lenders may be willing to move forward with 12 months on the part-time job, provided the part-time income has stayed consistent, along with other factors.
Again, every situation is different, and there are no guarantees. You can go over your specific situation in detail with a Veterans United loan officer at 855-259-6455.