In the FHA process, there are a few things you will be asked for:
- Pay stubs
- W2 statements
- Bank statements
- Tax returns
As a W2 contractor, assuming you categorize this under the guidelines for seasonal employment, here are the criteria:
Has worked the same line of work for the past two years; and
Is reasonably likely to be rehired for the next season.
For employees with Seasonal Employment income, the Mortgagee must average the income earned over the previous two full years to calculate Effective Income.
As opposed to self-employment:
A Mortgagee may consider income as stable after a 20 percent reduction if the Mortgagee can:
Document the reduction in income was the result of an extenuating circumstance;
The Borrower can demonstrate the income has been stable or increasing for a minimum of 12 months; and
The Borrower qualifies utilizing the reduced income.
Effective Income must:
Be likely to continue through at least the first three years of the
Be legally derived; and
Be reported to the IRS when required