FHA Loans For Moms Returning to Work

Recently I wrote about how a mortgage approval pretty much lives and dies through income verification these days. While it may seem like a dramatization it really is not, in fact its almost an understatement. This is because not only is income verification important but your employment history is equally important. I bring this up because recently I’ve had to qualify a young couple for a home and the employment history of the co-borrower became a cause for concern.

This young couple, whom we eventually were able to approve, had an excellent credit history and were not first time home buyers. In fact considering how young they were I was very impressed with their home buying savvy. The main issue for this couple was that they needed both of their incomes to qualify for the house they wanted. Using both incomes meant they were well within the DTI limitations for the loan program and were in a very strong financial position.

The kicker was that the co-borrower had recently rejoined the work force after having stayed home with the kids for a few years. This posed a slight problem for the loan approval because certain criteria had to be met in order to use this co-borrowers income for loan qualification purposes. Since we were doing a FHA loan program the co-borrower had to me the following criteria:

1. The borrower must have been working for at least one year on the current job.
2. The borrower must have worked at least two years before leaving the workforce to stay at home with the children.

Both of these conditions needed to be met in order for the co-borrowers income to be used. The FHA underwriter made it clear that meeting only one was not sufficient. In our case the co-borrower was able to furnish W2’s for two years from their last place of employment and it helped that she had been working for the past year. So, we passed on both counts. Certainly a hurdle that no one had expected had been crossed and everyone was pleased.

FHA certainly doesn’t want to penalize a stay at home mom or any other kind of borrower who had to temporarily leave the workforce. But a stable job history is the only way to determine the earning potential for a borrower. So, if you are in this kind of situation make sure you have the necessary documents to prove to a lender that you will indeed be able to make the monthly payment.

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