B3-3.2-02, Standards for Employment-Related Income (03/04/2026)

Borrowers who are qualifying with income from multiple employment sources at the same time, including self-employment, must meet the requirements for each specific income type, as well as the following requirements:

• A two-year history for each income source is recommended; however, income that has been received for a shorter period of time (but, no less than 12 months) may be considered as acceptable income, as long as there are positive factors to reasonably offset the shorter income history.
• When the borrower’s employment history includes different employers, in no instance may the borrower have any gap in employment greater than one month in the most recent 12-month period, unless the employment is considered seasonal income (subject to the requirements in B3-3.3-08, Seasonal IncomeB3-3.3-08, Seasonal Income).

Note: When one of the income sources is from self-employment (borrowers with a 25% or greater ownership interest in the business), self-employed documentation and eligibility requirements apply. See B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed BorrowerB3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower for requirements.

Future increases in pay from the borrower's current employer may be included as qualifying income when the following requirements are met:

• The income is fixed base only.
• The transaction is a purchase money or limited cash-out refinance transaction.
• The increase must take effect no later than 60 days after the note date.
• The increase is fully verified with the employer using Form 1005, Request for Verification of Employment or other documentation directly from the employer that provides the terms of the future pay increase.
• Borrower must not be employed by a family member or interested party.

Note: Borrowers who are qualifying using income from a future employer must meet the requirements in B3-3.3-03, Employment Offers or ContractsB3-3.3-03, Employment Offers or Contracts.

Borrowers who are employed by a family member or interested party must meet the requirements for the specific income type(s) outlined in the respective sections throughout Chapter B3–3, Income Assessment, and the following:

• Borrower must have been employed by the business for at least the 12 months prior to the application date.
• The lender must obtain copies of the most recent year’s signed federal income tax returns that reflect borrower has less than 25% ownership in the business owned by the family member or interested party. If the borrower has 25% or more ownership, the borrower must be qualified as self-employed.
• The borrower’s qualifying income must be consistent with the most recent year’s earnings, which must be documented with a W-2 or tax returns.

If a borrower’s income is validated by the DU validation service, lenders are not required to determine if the borrower is employed by a family member or interested party to the property sale or purchase.

Foreign income is earned by a borrower who is employed by a foreign corporation or a foreign government and is paid in foreign currency. Borrowers using foreign income to qualify must meet the following requirements:

• Copies of signed federal income tax returns for the most recent two years that include foreign employment-related income.
• The lender must satisfy requirements based on the source and type of income as outlined in Chapter B3–3, Income Assessment.
• All documents of a foreign origin must be completed in English, or the lender must provide a translation, attached to each document, and ensure the translation is complete and accurate.
• All income must be translated to U.S. dollars.

Note: If the borrower is not a U.S. citizens, refer to B2-2-02, Non–U.S. Citizen Borrower Eligibility RequirementsB2-2-02, Non–U.S. Citizen Borrower Eligibility Requirements, for additional information.