Part-time earnings or second jobs may not count when seeking a mortgage loan approval in Kentucky

Part-time earnings may not count when seeking a mortgage.



The two-year rule for counting part-time income has been an industry standard for years and was recently incorporated into regulations adopted by the Consumer Financial Protection Bureau. The rationale is straightforward: If part-time income hasn’t been established for an extended period of time, it may not be dependable or available in the future to make monthly payments on a mortgage. The industry also has restrictions on qualifying seasonal income and overtime earnings.
 Part-time or second-job income may be used if it can be verified as having been uninterrupted for the previous 2 years and there is a strong likelihood of continuation. Seasonal income may be considered if the borrower has worked in the same job for the past 2 years, and expects to be rehired for the next season


Using Income from a 2nd Job

Generally speaking, each program wants to make sure that the borrower has a stable and documented history of working two jobs. This is very common for many occupations (health professionals, firefighters, etc), as full time is often less than 40 hours per week. Schooling/Training directly related to the borrower’s current position can often count as work history. This flexibility can help you qualify for borrowers!

•FANNIE Conventional DU: Requires a 24-month uninterrupted history of secondary employment, but an underwriter may accept a shorter history as long as it at least 12 months if there is other positive factors. Found in Ch. B3-3.1-05

•FREDDIE Conventional LP: Requires a 24-month uninterrupted history of secondary employment, but an underwriter may accept a shorter history as long as it at least 12 months AND there are other positive factors and we can support that the income is stable. Guidelines also give specific instructions for teachers who teach summer school – this income would be allowed at the start of the second summer the borrower is teaching. Also, if a borrower had a 40 hr primary job, and was laid off and replaced the income with two part-time 20 hr. jobs in the same field/line of work could be considered as stable after 12+ months. Found in Ch. 5305.2


equires a 24-month uninterrupted history of secondary employment in order to use income to qualify, and there must be a likelihood of continuance. Found in 4000.1 handbook, Part II, Section A, part 4, section c.

•VA: Secondary income is generally not considered stable unless it has a 24-month history and a likelihood of continuation. If the income has been received for at least 12 months, the underwriter may at their discretion, use it to offset debts that have 10-24 months left (car notes, installment loans, etc.) Found in Ch.4, 2-h

•USDA: USDA follows FHA guidelines for secondary income as the USDA guidelines do not specifically address secondary income



Unacceptable Sources of Income

Income derived from any of the following may not be used in calculating qualifying income:

• Projected income
• Draw Income
• Capital withdrawals
• Expense/Auto Reimbursement 
• VA Education Benefits
• Income not listed on Tax Returns
• Any income that cannot be documented and verified.

How much house can you qualify for?

Traditionally, mortgage lenders have used something known as the 28/36 rule to determine how much of a mortgage you can qualify for. This refers to two income ratios that provide guidelines for your maximum monthly payment.

Front-end ratio-The “28” is known as the front-end ratio and says that your mortgage payment, including taxes and insurance, shouldn’t exceed 28% of your pre-tax income.

Back-end ratio-The “36” is called the back-end ratio, which means your entire debt load, including your mortgage payment, car payment, credit cards, student loans, and other monthly payments shouldn’t exceed 36% of your pre-tax income.

Some lenders will stretch these limits even further. For example, if your loan is a qualifying mortgage under Fannie Mae’s underwriting standards, and you meet a few other requirements, you can qualify for a debt-to-income ratio of up to 45%. In other words, if your monthly paychecks are $5,000 before taxes, you could qualify for a mortgage as long as it doesn’t cause your monthly debt load to exceed $2,250. No doubt this is on the high end of the spectrum for what you can afford with little cushion for unexpected events.

Credit history – Lenders will generally review your FICO Score to better understand your risk as a borrower and the interest rate offered. Homeowners will need a minimum FICO Score of 580 to qualify for an FHA, low down-payment mortgage. Potential homeowners with larger down payments will need a FICO Score of 620 to 660, depending upon lenders. That’s not to say anyone with a lower score won’t qualify, but there’s no hard-and-fast rule on credit scores and qualifying for a mortgage.

If you’re thinking of buying a home for the first time, or maybe haven’t owned since the real estate collapse starting in 2008, you may be wondering what credit score you need to get a mortgage. 

In fact, before the housing market crashed, it was far easier for the average person to get a loan since credit standards were very low (or nonexistent!) and the subprime loan market was nearly unregulated.

However, banks and lenders have tightened up their lending standards since then (which is a good thing), including the credit score you need to qualify for a mortgage.

So let’s look at some data that will help us define what score you need to get a mortgage loan approved:

What credit scores are being turned down for loans?

To help gauge what credit score you realistically need to buy a home (and get a mortgage), we can also check the average credit score for loans that were actually denied.

In fact, the average credit score has dropped to 645 in 2017, a decrease from a declined loan average of 675 in 2016. (The number and percentage of declined loans has also dropped.)

According to FICO, the average score for denied FHA purchase applications was 636.

For VA loans, the average FICO score for denied purchase loan applications is 642.

Crunching the credit score data for closed loans

We can also ascertain some data about not just guidelines, but information from actual closed loans.

Mortgage servicer Ellie Mae is a great source for that information, since about a quarter of all loan applications in the U.S. pass through that agency.

After tracking 3.7 million loan applications, Ellie Mae found that the average FICO score for approved/closed FHA loan applications is 645, down from 689 in 2015.

Approved conventional loans have an average score of 719, down from 731 a year ago and 755 in 2015.

For VA loans, the average approved purchase loan has a 707 FICO now.

Credit score minimums by loan type

The easiest way to figure out what credit score you might need to buy a house is to just open the “rulebook” for different loan types.

FHA loans have a minimum credit score requirement of 500 with a 10% downpayment.

But most FHA loans are approved with a score of 580 and up

VA Loans – 620+ credit score

USDA Loans – 640+ credit score

FHA 203K Loans – 620+ credit score

Conventional Loans – 620+ credit score

But that doesn’t mean you’ll be approved with that credit score!

Don’t get too excited if you have those minimum credit scores, because that doesn’t mean you’ll be automatically approved.

That’s because individual lenders apply what’s called “mortgage overlays” which means they have more stringent credit standards than those programs dictate.

In fact, a recent study by Fannie Mae found that nearly two-thirds of mortgage lenders apply mortgage overlays these days, with 47% of lenders calling for higher credit score overlays.

For instance, FHA – the Federal Housing Administration – may only require a 500 credit score on paper, but the FHA also doesn’t lend any money or issue any loans! Instead, the FHA is a governmental agency that insures loans made by other lenders, and so we see it’s rare and difficult to get an FHA loan approved with a score under 580.

Remember that the lower your credit score, the more you can typically expect to pay for your mortgage interest rate. For instance, with FHA if your score is:

579 and lower score: If you get approved at all, your interest rate will probably be 2% higher than conventional rates.

580-619: Your interest rate will be up to 1% higher than the lowest rates available.

620-679: Your interest rate will only be bumped up slightly – probably by about .5%.

680+: Your rate probably won’t be affected at all, and with a 720 or 740 and up score, the best rates will be available.

What is the average credit score for mortgage holders, and homeowners?

To put it another way, people with mortgages have higher credit scores than the general public, as do homeowners. In fact, the average credit score among non-mortgage holders in the U.S. is 613, compared to 649 for FHA loan holders, and 652 for conventional real estate mortgagees.

So is YOUR credit score good enough to buy a house? Chances are that with our help and a few months, you’ll be in prime position to qualify for a great home loan and get the keys to a new house!


Joel Lobb
Mortgage Loan Officer
Individual NMLS ID #57916
American Mortgage Solutions, Inc.
10602 Timberwood Circle 
Louisville, KY 40223
Company NMLS ID #1364

Text/call:      502-905-3708

fax:            502-327-9119


Author: Louisville Kentucky Mortgage Broker Offering FHA, VA, USDA, Conventional, and KHC Zero Down Payment Home Loans

I have helped over 589 Kentucky families buy or refinance their home over the last 18 years. Realizing that this is one of the biggest, most important financial transactions a family makes during their lifetime, I always feel honored and respected when I am chosen to originate their personal home loan. You can count on me to deliver on what I say, and I will always give you honest, up-front personal attention you deserve during the loan process. I have several advantages over the large banks in town. First, I can search and negotiate for your loan options through several different mortgage companies across the country to get you the best deal locally. Where most banks will offer offer you their one set of loan products. I have access to over 10 different mortgage companies to broker your loan through to get you the best pricing and loan products that may not fit into the bank's program due to credit, income, or other underwriting issues. You will not get lost in the shuffle like most borrowers do at the mega banks; you're just not a number at our company, you are a person and we will treat you like one throughout the entire process. Give us a try or let us compare your options on your next mortgage transaction. Call me locally at 502-905-3708. Free Mortgage Pre-Qualifications same day on most applications. Email me at with your questions I specialize in Kentucky FHA, VA ,USDA, KHC, Conventional and Jumbo mortgage loans. I am based out of Louisville Kentucky. For the first time buyer with little money down, we offer Kentucky Housing or KHC loans with down payment assistance. Customer Testimonials 😍😍😍 We just moved here the first of January in 2017 from Ohio to the Louisville, KY area and we found Joel's website online. He was quick to respond to us and got back the same day on our loan approval. He was very knowledgeable about the local market and kept us up-to date throughout the loan process and was a pleasure to meet at closing. Would recommend his services. Angela Forsythe "We were searching online for mortgage companies in Louisville, Ky locally to deal with and found Joel's website, and it was a godsend. He was great to work with, and delivered on everything he said he would do. I ended up referring my co-worker at UPS, and she was very pleased with his service and rates too. Would definitely vouch for him." September 2016 Monica Leinhardt "We contacted Joel back in July 2011 to refinance our Mortgage and he was great to work with. We contacted several lenders locally and online, and most where taking almost 60 days to close a refinance, Joel got it done in 23 days start to finish,I would definetly recommmend him. He got us 3.75% with just $900 in closing costs on our FHA Streamline loan. Kayle Griffin “Joel is one of the best Mortgage Brokers I have ever worked with in my sixteen years in the real estate and mortgage business.” May 25, 2010 Tim Beck “Joel has always worked very hard to keep his word and to work out seasonable solutions to difficult problems. He is truly an expert in FHA and other type loans.” September 1, 2010 Nancy Nalley “I have worked with Joel since 1998. He is a great loan professional.” I refer most of my Louisville, Kentucky area home buyers to him and he always take special care of them. August 23, 2012 Jon ClarK “Joel Lobb is a real professional in the lending industry, with many years of experience, he is the one to go to for any mortgage lending needs.” August 22, 2011 RICHARD VOLZ , Residential Sales , Remax Foursquare Realty “When looking to purchase our new home in 2006, I had the pleasure of meeting Joel Lobb. Not only was he personable and easy to reach, he was extremely knowledgable in his field and made sure to find us the best rate and a top notch mortgage company. We were able to complete the process in less than 3 weeks with his expertise. I find Joel to have the utmost high integrity and I recommend him to anyone who say's they are need of mortgage assistance. He is also fantastic and keeping everyone up to date on the latest in the housing industry through his twitter posts. He provided great results for our family and we still communicate to this day!” August 21, 2010 Stacie Drake "We first use Joel on our new home purchase in 2007 in St Matthews, Kentucky area and he was great to work with. We have since refinanced our home with him in 2010 when rates got really low and he has always delivered on what he says. I could not imagine using anyone else." Melody Glasscock March 2014 Absolutely Amazing!! I emailed Joel after I had just got a denial from a bank and just thought i would try to get some advice on what my next steps would be to get a house. I honestly didn't expect to even get a reply because my credit is not great. That was about a week and a half ago. I just signed a contract on a house last night. ONLY because of Joel Lobb. He even worked with us throughout the weekend, which shocked me. Best decision I have ever made. THANK YOU SO MUCH FOR WORKING WITH US THROUGHOUT THE ENTIRE PROCESS. Cee Bellisle August 2017 Contacted him about buying a home and he was great to work with. I was moving to Louisville Ky to take a new job and he walked me through the entire process. He explained to me all the different options for FHA, VA, USDA mortgage loans and credit score requirements versus Fannie Mae. Since I was a first time home buyer I needed alot of help and guidance. I would definitely recommend him. Fast to respond and available to answer questions that I or my realtor had after hours. Anderson Johnson April 2018 Wow, what a great loan officer. I was referred to him by our agent and he was great to work with. We used him for a USDA no money down loan in Shelby County and we were really impressed. We were afraid we could not buy a home since we did not have money saved for a down payment, but Joe l was able to get us a zero down loan and we even got our appraisal fee and good faith deposit back at closing. We actually got money back at closing!!! I Can't think him enough. Our family moved from our apartment in the south end of town to get our own home with 5 acres for our kids and 2 dogs, at a payment that is equal to our rent payment also. .Thanks Again Joel. May god bless you Patty Locker We contacted Joel about buying a house on our move from Ohio for my husband's job transfer with Ford. We put a lot of trust in him since we were new to the area and first time home buyers in the Louisville KY market, and he always delivered on what he said. It took us a while to find a home due to the lack of homes, but once we got one, he was always quick to respond our questions via text or email ,and kept us informed through the process. We got to meet him at the closing and he was super nice and even got us a closing gift for our home which we didn't expect at all. Super nice guy 😀!!! I would definitely recommend him for a local Home loan in the Louisville area. pam dolby I got a VA loan with Joel and he was great. He is an ex-army guy so he could relate to my past experiences of being a veteran and moving around the country a lot. I had some credit issues that required a little extra work but Joel was able to find A VA lender to approve my situation as far as having past bad credit problems and a lower credit score. We closed yesterday on our home here in Louisville and we could not be happier. We finally have a home of our own thanks to Joel . I would definitely recommend him for a mortgage loan. Great experience and closed 8 days before expected close date so we were able to move in early. larry summit I contacted Joel about the $10,000 KY Housing Grant last month and we were able to get it and I just closed on my home. He was great to work with and if you are a first time home buyer here in Louisville, I would definitely contact him. I met him at his office and he was very nice and knowledgeable and kept me informed through the process. No surprises either so I was very happy. I am new homeowner thanks to Joel . Joel Lobb Senior Loan Officer American Mortgage Solutions, Inc. 10602 Timberwood Circle Suite 3 Louisville, KY 40223 phone: (502) 905-3708 Fax: (502) 327-9119 Company ID #1364 | MB73346E This website is not an government agency, and does not officially represent the HUD, VA, USDA or FHA or any other government agency. Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant's eligibility and market conditions. NMLS#57916 . The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.

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