When Fannie Mae and Freddie Mac added the guideline about variable income they took the normal over time, bonus and commission pay types and added variable hourly pay and how long you must receive before the income is considered stable.

Variable hourly pay is any pay that is either not salary or a fixed amount every single pay period. For example, if a Written verification of employment reflects a 40 hour work week but pay stubs show 39 hours one week, 40 another, 38 another and 40 then that is variable pay. It is not a constant rate of 40 hours per week every week.

When this happens, an hourly paid employee must have a minimum of 12 months employment as an hour employee that is variable or must have had a salary or hourly job in the same line of work or industry for a minimum of 12 months.

An example would be a job in pest control. Say the pay is hourly and the hours vary and have been doing it for ten months. Prior to that they worked in the restaurant business hourly. They would not be able to count any of this income because it is less than 12 months and not in the same line of work that they were previously in.

Income can be stable once you hit 12 – 24 months and is stable once you reach 24 months. If pay is salary it is classified as stable automatically or if work is a consistent 40 hours or set hours per week. The option when this happens is to go FHA with the loan file. On FHA there is not a 12 month minimum required, although it would be good for the sake of underwriting. With FHA you just take the start date to the most recent pay stub and divide that to get your income.