EMPLOYED BY FAMILY GUIDES
Short answer
Working for a family member does not disqualify you. It does trigger extra documentation — typically proof that you have no ownership interest in the business, plus independent verification of the income.
Ask about your actual file — no SSN, no credit pull.
The rules have changed over the years when a family member is employed by a family business. Knowing which product to choose to make the application flow without issues is key as all agencies do not have the same requirements.
When North Star Mortgage Network underwrites a Florida borrower employed by a family member, we source the file with the additional documentation Fannie Mae and Freddie Mac require to establish that the employment and the income are real and likely to continue. Agency guidelines and individual lender overlays vary, and all loans are subject to credit approval.
Here are the guides for each agency. On conventional loans this applies to borrowers employed by family or interested parties to the transaction like the seller, realtor, broker, and anyone that makes the transaction a non-arm’s length closing.
As an example, Freddie is beneficial with one year tax return, but Fannie is beneficial in what they allow to be used as income.
FANNIE MAE
Must have 2 Years tax returns regardless of how long they have worked for the company. Income must make sense and be supported by previous and current income levels.
FREDDIE MAC
Only requires 1 year tax return OR IRS Wage and Income transcripts.
The documentation must validate prior year’s earnings and support current years income.
The rate quote takes no Social Security number and no credit pull. Nathan Young, NMLS #325206 · North Star Mortgage Network, Inc. NMLS #356789 · Jacksonville, FL · Serving Florida since 2000. All loans subject to credit approval.
If the current income level is not supported by the previous year, you must use the previous year’s income.
FHA
Must prove the borrower is not an owner in the family business by using official business documents.
Documents include corporate resolutions, business tax returns or other organization documents. An official letter from a CPA on their letterhead will work as well.
In addition to above you must have tax returns and transcripts. It does not designate how many years. That will be lender discretion.
Income used is the standard FHA income calculations for salary or hourly.
VA
VA does not address this in their guides. Mr. Cooper treats it similarly to FHA. Making sure they verify any ownership in the property and income must make sense.
USDA
USDA does not have specific guides as they already require two years tax returns and transcripts to verify income. Therefore, they already have the information needed to document potential ownership. Family income can be looked at in more detail than standard employment. Large increases in income with no supporting explanation will need to be addressed and properly documented.
This scenario comes up often with buyers in Fernandina Beach and Ponte Vedra Beach. Contact our team for a personalized review of your situation. Get a rate quote — no SSN required to get started.
Nathan Young is the founder and president of North Star Mortgage Network, Inc., an independent mortgage brokerage in Jacksonville, FL serving all of Florida since 2000. Call or text direct: 904-880-6741. Office: 904-880-6741. Nathan Young NMLS #325206 | North Star Mortgage Network, Inc. NMLS #356789 | nsmn.com
This article is for general education only and is not legal, tax, or financial advice. Agency guidelines may change, and individual lender overlays can be stricter than agency requirements. Available for qualified borrowers; program guidelines apply. This material has not been reviewed, approved, or issued by HUD, FHA, or any government agency. North Star Mortgage Network, Inc. is not affiliated with or acting on behalf of any government agency. All loans subject to credit approval. North Star Mortgage Network, Inc. | NMLS #356789 | Jacksonville, FL | nsmn.com | 904-880-6741
More family mortgage topics: gifts, co-borrowers, buying for a parent, divorce and inherited homes are all in one place in our Family and Mortgages in Florida guide.
