Can you use part-time income for a mortgage?
Money earned from part-time work can help you qualify for a new mortgage loan. But the part-time income must be steady and reliable. Typically, you need to have been in the job at least two years for your part-time income to count.
Part-time income rules are straightforward. With a small amount of extra documentation, a lender can use part-time income to strengthen your mortgage application and help you qualify for a bigger loan.
In this article (Skip to…)
- Buying with a part-time job
- Qualified part-time income
- Other requirements
- Self-employed mortgages
- Other options
Buying a house with a part-time job
Part-time employment is a valuable source of income for workers across the country. In 2021, more than 25 million Americans worked part-time jobs, according to the Bureau of Labor Statistics. That’s about 15 percent of the American workforce.
Mortgage lenders can accept income from these part-time jobs for many loan applications. The key for borrowers is to document their income properly while showing the income should continue for at least the next three years. This is true whether borrowers have only part-time work or if they supplement their regular full-time employment with a second, part-time job.
To document your earnings, you’d need to show proof of income, usually by uploading W2 forms or pay stubs from each employer. Lenders may also seek verification of employment by calling your employers.
Qualifying for a mortgage with part-time income
Time on the job is the key factor in whether lenders will include your part-time earnings as qualifying income for your loan. As a general rule, lenders need to see proof you’ve held the part-time job for at least two years.
This two-year rule matters because statistics show that income you’ve earned for the past two years is likely to continue for at least three more years.
Qualifying with a full-time and part-time job
A two-year history in the job isn’t always enough for mortgage qualification. Lenders may also want to know whether you’ve held the part-time job and a full-time job simultaneously for at least two years.
For example, if you’ve worked part-time in retail for five years but just started your full-time career in public education six months ago, the lender may not count income from both jobs.
Why? Because working multiple jobs is hard, and underwriters aren’t sure you can maintain your current workload for three more years. If you can’t, you may not be able to keep up the mortgage payments, and the lender could lose money.
Qualifying with only one part-time job
Some home buyers work only one, part-time job. They can use this income to qualify for a home as well.
Guidelines are less restrictive if you have a part-time job as your sole source of income. For instance, a nurse who works 24 hours a week will verify income the same as a 40-hour-per-week plumber.
It’s easiest to qualify when you can show a two-year work history in the same job. But there are exceptions. For example, if the nurse recently started at a new hospital but worked in a different hospital for the previous two years, the lender will likely consider the new job steady and reliable.
Sometimes, having the education or licensure for a specific job can overcome a shorter work history. Other times, an employment contract is enough to prove income.
Each circumstance is different, so applicants should check with their loan officer to find out if their income will qualify for the loan.
Income is only part of the equation
Qualifying income shows your monthly gross income — the amount you earn before taxes. But that’s not your full financial picture. Lenders want to know about your budget and how much you can actually afford to spend on a home loan each month.
That’s why the mortgage underwriting process also checks out your current debts. The lender will combine payments on your auto loans, credit cards, student loans, and personal loans. Then it compares your total debts to your monthly income. This comparison is called your debt-to-income ratio, or DTI.
How DTI affects loan eligibility with part-time income
If you have $7,000 a month in qualifying income and pay $2,100 a month in debt payments, your DTI would be 30% — low enough to qualify for any major loan program, and low enough to get a competitive interest rate, assuming you have a strong credit score.
But if $2,800 of your $7,000 total income came from a part-time job whose income didn’t qualify, your lender would place your qualifying income at $4,200 instead of $7,000.
With only $4,200 of gross income, your $2,100 in monthly debt would equal half your income. Your DTI would jump to 50% — too high for most loan programs. (An FHA lender might approve you if your loan application is otherwise strong.)
Even if you do get approved, your DTI would limit your loan size which means buying a less expensive house.
You can see why it’s important to report all of your income if possible — especially if you have a big debt load.
Self-employed mortgages with part-time work
Self-employed mortgage borrowers have a harder time documenting their income. Since they won’t have W2 forms, they rely on tax returns to show how much they earn.
Business deductions, which lower your tax burden, also lower your gross monthly income. This can raise DTI, jeopardizing mortgage qualification — or at least limiting the borrower’s loan size.
Self-employed borrowers who also work a part-time job, maybe as a W2 employee, can use the part-time work to boost their mortgage application’s qualifying income.
Again, it’s easiest to use the part-time income when you’ve worked that job for at least two years — and when you’ve paired part-time work with your self-employment for at least two years.
Other ways to use part-time income for a mortgage
Adding part-time earnings can make your mortgage application more attractive to lenders. More attractive borrowers can get better interest rates and larger loan amounts.
More monthly income could also help lenders overlook a borrower’s less-than-stellar credit history.
But there’s another way a part-time job can help with homeownership — especially for first-time home buyers, and it’s simple: A part-time job means you earn more money. When you’re home shopping, more money in your pocket can lead to:
- A bigger down payment: If you worked part-time and saved most, or all, of the money you earned on the job, you should have a lot more money set aside for a down payment. A bigger down payment can open up more loan options with lower rates
- Lower PMI premiums: Putting more money down can lower private mortgage insurance (PMI) premiums on conventional loans. Putting down at least 20% eliminates PMI altogether
- More equity: More money down also bumps up your equity in the home from day one. More equity could make a refinance easier if rates fall in a couple years, It also lets you borrow from yourself via a home equity loan or home equity line of credit (HELOC)
- Cash reserves: Some, especially with jumbo loans, want to see padding in a borrower’s bank account — just to make sure they could keep the loan current if they were to lose their job. Part-time earnings can boost savings for this purpose
Yes, more money creates more options. But don’t worry: If you haven’t had a chance to save, you could still buy a house. Some home buyers can skip the down payment altogether. Others can get help from local government and non-profit down payment assistance programs.
Buying a house with part-time income: FAQ
Yes, a mortgage lender can count part-time earnings as qualifying income for a home loan. It helps to have a two-year employment history in the job, or at least in the profession. If the part-time income supplements your full-time income, a lender may want to see two years of employment history in both jobs simultaneously.
Yes, but the amount you earn affects loan eligibility and loan sizes. The more you earn, the bigger loan you can get. You could also see this equation from another angle: Lowering your existing debt can boost your home buying budget. Of course, earning more and owing less in existing debt offers the best of both worlds.
You need enough steady and reliable income to show a mortgage lender you can make your new home’s monthly payments. A lender can accept part-time or full-time employment — or both simultaneously — as long as underwriters expect you’ll keep making the same or greater income for at least three more years. That being said, with today’s real estate prices, most buyers need full-time jobs to afford mortgage payments.
It’s possible. Lenders typically want to see a two-year history in the same job — or at least two years of employment in the same profession. But some borrowers with a short work history can overcome this challenge if they have an employment contract or the credentials to work an in-demand job in a high-paying field.
What are today’s rates?
Many renters with part-time incomes assume they are not eligible to buy a home. That’s not always true.
Mortgage lenders can count part-time income if it’s steady and reliable. So if you can afford the loan’s payments on your part-time income, you could meet the lender’s income requirements.
A mortgage preapproval will show your borrowing power — and your mortgage rate — based on your current employment. Get started today by contacting a lender to learn whether you’re qualified.