How your school-year, shift or overtime pay counts toward a mortgage

Why public-service paychecks confuse underwriters

The jobs Georgia Dream's PEN tier was built for rarely come with a simple, flat paycheck. Teachers are paid on a school calendar. Bus drivers and cafeteria staff may have summers off. Nurses work 12-hour shifts with differentials. Deputies and firefighters pick up overtime that swings year to year. None of that is a problem, but it means your lender has to explain your income on paper. Knowing the rules ahead of time helps you gather the right documents and set realistic expectations.

Ten-month and twelve-month school pay

Freddie Mac's guide is clear: when an annual salary is paid over fewer than 12 months, as with many teachers, the lender divides the annual gross pay by 12. Its own example is monthly pay times 10, divided by 12. A teacher earning $5,400 a month over 10 months qualifies on $54,000 a year, or $4,500 a month.

Freddie also treats an annually renewable teaching contract as support that the income will continue, unless the lender knows otherwise. How FHA, Fannie Mae, VA and USDA handle the 10-month calculation wasn't confirmed for this guide, so your lender confirms if you're using one of those.

Summer school counts as seasonal or secondary work under Freddie's rules, and summer school income with less than 2 years of history can sometimes be justified.

New teachers and new hires

If you've just signed your first contract, you may not need to wait for a long paycheck history:

• Fannie Mae accepts a fully signed, non-contingent offer naming the job, pay and start date. Under one option, the start date can fall from 30 days before to 90 days after closing, if you qualify on fixed base pay and have reserves.
• Freddie Mac allows income starting up to 90 days after the note date for salaried or guaranteed-hour jobs, with funds to cover your bills until you start.
• FHA has no offer-letter provision, but recent graduates can use school enrollment to satisfy the 2-year history.

Georgia's PEN tier covers new hires too. Certified Head Start, Pre-K and day care teachers outside a school board must hold current Georgia certification when DCA underwrites the loan.

Bus drivers, paraprofessionals and other school staff

PEN's educator group is broad: all employees of an accredited school board, including bus drivers for an accredited system even when busing is outsourced, plus private school and college employees. Many of these jobs are hourly with breaks in the summer. Lenders generally look for a 2-year history in the same kind of work. Freddie's guide also lets a lender justify seasonal income with less than 2 years. Your lender confirms how your hours and summer break are treated.

Nurses and 12-hour shifts

Freddie Mac's guide includes a nurse example: three 12-hour shifts a week, verified as the minimum required hours, can be treated as 36 hours of base pay even with only 4 months on the job. That can help a newly licensed nurse at a state-licensed hospital, clinic or nursing home buy sooner. All of those employers fall under PEN's health care group.

Shift differentials (extra pay for nights or weekends) aren't named as a separate income type in the FHA, Fannie Mae or Freddie Mac guides. Lenders generally treat them like other variable pay, but that's unconfirmed, so ask.

Overtime for deputies, officers and firefighters

Overtime counts once it has a track record:

• FHA: 2 years of history, or at least 1 year if it was consistent and is likely to continue. FHA uses the lesser of the 2-year average or the prior year's average.
• Fannie Mae: 2 years recommended, 12 months acceptable with other strengths. If overtime is falling, the lender has to confirm it has leveled off.
• Freddie Mac: 2 years with a 12-month minimum if justified, likely to continue 3 years. A drop of more than 10% needs extra analysis.

Here's an example only for a Chatham County deputy:

The 2-year overtime average is $8,400. The prior year is $7,200. FHA uses the lesser, $7,200, or $600 a month, on top of base pay. Overtime fell 25%, so Freddie Mac would require a closer look at why and evidence that it has stabilized.

A second job on the side

Many teachers coach, tutor or work retail in the summer, and many firefighters work a second trade on off days. FHA wants 2 years of uninterrupted part-time income, averaged over 2 years. Fannie and Freddie generally want 2 years but can accept 12 months or more in some cases. Self-employed side work follows separate rules; see our self-employed buyer guide.

Don't forget the income limit

Georgia Dream's limit counts the total income of every adult in your household. Overtime and second jobs may help you qualify for the loan, but they also count toward that limit. In metro Atlanta, the limit is $137,555 for 1 to 2 people and $158,188 for 3 or more. Elsewhere it's $101,700 and $116,955. Check your county on the income limits page.

Documents to gather

1. 30 days of pay stubs showing year-to-date earnings
2. Two years of W-2s
3. Your current contract or offer letter, if you're a teacher or new hire
4. A written verification of employment, which can break out base pay and overtime
5. Proof of your PEN job for DCA's review

Your paycheck may be unusual, but it's not a problem to be solved alone. Gather what you have and check your eligibility.

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