At North Star Mortgage Network, we specialize in helping clients secure mortgage loans based on future income, even before they officially start their new jobs. In many cases, it is actually easier to close a loan before the employment start date rather than waiting until after, which would require pay stubs and written verification of employment (VOE). However, navigating these loans depends on various factors, especially the structure of the employment offer.

Challenges with Hourly Employee Contracts

One of the primary hurdles in using future income for mortgage approval is when the borrower has an hourly employment contract rather than a salary-based offer. Lending agencies tend to view hourly pay as uncertain because the number of hours worked can fluctuate. This creates a potential risk in ensuring the borrower has consistent income to meet loan obligations.

Fannie Mae vs. Freddie Mac: Understanding the Guidelines

The guidelines for future income-based mortgage approvals vary between Fannie Mae and Freddie Mac.

Freddie Mac’s Stance on Future Income

• Allows future salary increases.
• Requires the income to be non-fluctuating and salaried.
• Does not permit hourly earnings.

Fannie Mae’s Approach to Future Income

• Previously required salary income only.
• Now requires fixed base income, which is more flexible.
• Guarantees of a fixed number of hours per week can qualify under fixed base income, provided there is no variability.

This distinction is crucial because many underwriters, managers, and mortgage companies interpret Fannie Mae’s guideline as requiring a strict salary. However, the shift from “salary” to “fixed base income” means that borrowers with an hourly contract guaranteeing a set number of hours per week can still qualify.

The Key Takeaway

If you or a client has a job offer with a guaranteed number of weekly hours, this can be considered fixed base income, making loan approval possible under Fannie Mae’s guidelines. However, extra hours, overtime, and bonuses are not included in this calculation.

At North Star Mortgage Network, we stay up to date on these guidelines to help our clients secure the best possible loan options. If you’re considering a home purchase and need financing based on future income, reach out to us today to discuss your options!