Understanding Seasonal Income for Mortgage Qualification
Short answer
Seasonal income usually counts when there is a documented history in the same line of work and a reasonable expectation it continues. The averaging method is what decides how much of it you actually get to use.
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Part of our Self-Employed Mortgage Guide for Florida, which covers every way business owners and 1099 earners can qualify.
What Do You Do with Someone Who Has Income but Does Not Have It Year-Round?
Many individuals earn a significant portion of their income through seasonal employment, meaning they work for only part of the year but still maintain a stable financial situation. When it comes to qualifying for a mortgage, lenders have specific guidelines for assessing seasonal income to determine eligibility. Let’s explore how mortgage agencies handle this type of income.
At North Star Mortgage Network in Jacksonville, Florida, we qualify seasonal income by documenting a consistent earnings history and a reasonable expectation that the work continues, which is what agency underwriting looks for rather than a single year’s figures. Guidelines vary by program, and all loans are subject to credit approval.
How Long Must You Have Received Seasonal Income?
The length of time required for documenting seasonal income varies by mortgage agency:
- Fannie Mae, Freddie Mac, and VA Loans: Require two years of documented proof of seasonal income. Additionally, all agencies need to see a likelihood of continued employment in the following season.
- FHA and USDA Loans: These agencies word their requirements differently. Instead of needing two years on the same seasonal job, they require two years in the same line of work, meaning a borrower may qualify even if they have recently changed seasonal jobs within the same industry.
How to Calculate Seasonal Income for Mortgage Qualification
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.
Mortgage lenders average seasonal income over the past two years to determine an applicant’s monthly qualifying income. Here’s how it works:
- Example: A borrower works for three months a year and earns $12,000 during that period.
- To calculate qualifying income: $12,000 ÷ 12 months = $1,000 per month.
- The stability of income is also considered:
- Stable or increasing income: The two-year average is used.
- Declining income: May not be usable; lenders will typically use the worst-case scenario.
- USDA Loans: Instead of averaging past earnings, USDA loans use the expected seasonal income for the upcoming year as the qualifying income.
What Documentation Is Required?
To prove seasonal income, lenders require full income documentation, which may include:
- W-2 Forms (covering the past two years)
- Recent pay stubs
- Verification of Employment (WVOE) from the employer, confirming that seasonal work will continue
- Unemployment Benefits: If the borrower consistently receives unemployment benefits during off-seasons, this income can be included if there is a two-year history of receiving unemployment benefits when not working
Final Thoughts
For borrowers with seasonal income, mortgage qualification is possible as long as income stability and work history are well-documented. Lenders will evaluate the borrower’s income trends, industry consistency, and likelihood of continued employment to determine eligibility. Understanding how different loan programs assess seasonal income can help potential homebuyers plan ahead and improve their chances of securing a mortgage.
If you or someone you know relies on seasonal income and is considering homeownership, working with a knowledgeable mortgage professional can make the process smoother. Contact Nathan Young at North Star Mortgage Network today to explore your options!
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
