Second job? It may not help qualify for a mortgage

NEW YORK – Dec. 8, 2014 – The Consumer Financial Protection Bureau’s (CFPB) Ability to Repay rule enacted at the beginning of the year was created to block borrowers from biting off more mortgage than they can chew.

Almost a year later, however, there are signs that the requirement has become a big deal-breaker for loan applicants who moonlight working a part-time job in order to comply with Ability to Repay rule’s new debt-to-income criteria.

Under the guidelines, part-time pay counts toward an individual’s ability to repay a mortgage only if the employer confirms that the borrower has held the job for at least two years and plans to remain. Although a period of less than two years can be taken into consideration with a reasonable explanation, lenders remain skittish and prefer to err on the side of caution.

And while consecutive part-time jobs at different employers can be combined to meet qualifying terms, this exception applies only if the various positions are in the same industry.

The requirements frustrate borrowers who cannot pass the ability-to-repay test without including income from their secondary job and are rejected for a mortgage.

“We have a lot of young, creditworthy families who are being kept out the market,” notes University of Pennsylvania finance professor and former HUD policy adviser Susan Wachter. “If they try to supplement their wages with extra jobs, it’s hard getting lenders to consider that income, even with a consistent track record.”

Source: BusinessWeek (11/25/14) Howley, Kathleen M.

© Copyright 2014 INFORMATION, INC. Bethesda, MD (301) 215-4688

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