Mountain Mortgage Guy: Progressive thinking from mortgage lenders could help those with multiple jobs (column)
June 20, 2018
It used to be that having multiple jobs in multiple lines of work during the year was something that was only common in resort areas, where many jobs were seasonal. Ski instructors might turn to construction or landscaping work during the summer months. Waiters might pull a few shifts as river guides. Even teachers might have summer jobs to make ends meet.
But if you wanted to qualify for a mortgage counting your second or third job income, then you generally had to do the same jobs for at least two years. Oftentimes, that just didn't fit the box for prospective homebuyers who had multiple summer and winter careers.
Today, however, this work ethic has spread nationwide. It's estimated by some sources that 34 percent of the workforce has "gig" income. Gig income is defined broadly but basically boils down to holding multiple part-time jobs over a period of years. With the advent of Uber, Airbnb and many companies outsourcing work as specific "projects," millions of Americans are doing whatever it takes to get by.
In recognition of this, Fannie Mae and Freddie Mac, the two quasi-governmental agencies that supply most of the mortgage money in the United States and set the benchmarks for almost all loans, are studying how to quantify part-time income and take a real-world view toward incorporating it into the mortgage-approval process.
This change is not happening yet, but at least it is a start. There is a considerable amount of common sense in the thinking that people who have the hustle to work multiple jobs and have multiple skill sets have, in many ways, considerably more resources to fall back on than someone who works a single 9-to-5 job for years on end.
If the 9-to-5er with no other jobs were to lose his or her job due to the economy or technological shifts, then they may find their options very limited, particularly if the entire segment of the economy they knew so well was on the rocks. If a person working in an office and driving for Uber who has a paper route on Sunday morning loses one job, then they can often up their efforts at the other jobs to, at least partially, offset their lost income.
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The likely outcome will be to look at two years' average earnings from all jobs other than the primary job and focus more on the total income versus the work history. Most likely, the total from the gig income might be limited to a certain percentage of the primary job earnings or lenders could possibly only count a certain percentage of the gig income (say 70 percent) to allow for future fluctuations.
A definite factor, though, is the treatment of the gig income on one's taxes. If it's not reported, and taxable, then it's not going to be counted. So if you are planning to buy a home in the next few years and get cash for your gig income, then you had best report it and pay taxes on it.
Hopefully we will see some definitive rules in the next six to 12 months on how this progressive thinking is going to work out.
Chris Neuswanger is a mortgage loan originator with Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage-related questions from readers. His website and blog can be found at http://www.mtnmortgageguy.com.