Mortgage lenders consider several factors when deciding whether to approve your application for a loan: Your credit score, your monthly bills and, of course, your gross monthly income. Even if you work as a temp and do not work regularly with one employer, you can still qualify for a mortgage loan if you are financially healthy and can convince lenders that you are not likely to default on your home loan payments.
When determining whether you can afford a mortgage loan, lenders take a close look at two debt-to-income ratios, your front-end and back-end ratios. Your front-end ratio shows lenders how much of your gross monthly income is eaten up by your estimated monthly mortgage payments. In general, lenders want your housing payment -- a payment that includes your principal, interest, taxes and insurance -- to be no more than 28 percent of your gross monthly income. Your back-end ratio represents how much of your gross monthly income is consumed by your total monthly debts, everything from estimated new mortgage payments to minimum required monthly credit-card payments to auto loan payments. Lenders want your total monthly debt to equal no more than 36 percent of your gross monthly income.
Your gross monthly income -- your income before taxes are taken out -- consists of any income that you receive each month. This can include the pay you receive each month while working as a temp, any rental income you collect or any income you receive each month from legal settlements. You can also count alimony payments as part of your monthly income. If your gross monthly income from all sources keeps you below the debt-to-income ratio maximums accepted by most conventional lenders, you may qualify for a mortgage loan.
Proving Your Income
You will have to prove your gross monthly income when applying for a mortgage loan. This means that you'll have to make copies of your last two paychecks from your temp agency and copies of your last two years -- at least -- of income-tax returns. Your lender will study these documents as a way to verify that your temp income has been steady over the years. If you do work as a temp, your lender might require more than two years of income tax returns to make sure that your income from that source hasn't risen and fallen too sharply in the past.
A high credit score can increase your odds of qualifying for a mortgage loan. That's because a high score -- 740 or higher for most lenders -- shows lenders that you've paid your bills on time in the past. This can help you prove to lenders that you have income that is steady enough to handle your debt obligations.
Don Rafner has been writing professionally since 1992, with work published in "The Washington Post," "Chicago Tribune," "Phoenix Magazine" and several trade magazines. He is also the managing editor of "Midwest Real Estate News." He specializes in writing about mortgage lending, personal finance, business and real-estate topics. He holds a Bachelor of Arts in journalism from the University of Illinois.