This article was published on 2/19/2010, & was corrected on 1/7/2011
By MARILYN KENNEDY MELIA
The San Jose Mercury News

WHEN WORK WORKS AGAINST YOU

It's not all credit scores and income. Today, lenders are looking at what you do for a living before making a loan.

Solid credit, a down payment, and a salary sizable enough to cover debt duty. Could a lender ask for anything more?

Actually, yes. As mortgage lenders have been making a 360-degree turn away from the loose policies of the housing boom - when borrowers could get a loan without even disclosing what they earn - they not only now demand an adequate salary but a secure one, too.

"CI've been in the business for 30 years," observes Ron Smith, president of the Texas Association of Mortgage Professionals. " The guidelines [on how lenders judge an applicant's employment] have never been more conservative. As a result, many mortgage applicants, whether they'e asking for a relatively small home equity loan, a refinance, or a purchase mortgage, are being turned down because of their work status, notes Guy Cecala, publisher of Inside Mortgage Finance Publications. It's not that certain occupations are frowned on, Cecala explains. No matter what your line of work," Lenders are looking for consistency," he says. Your credit score is entirely separate from your income and employment status because the score is compiled only from payment information supplied by your creditors, relates Craig Watts, spokesman for FICO, a widely used scoring system.

However, just as credit scores are generated by computer analysis, automated programs analyze income and employment, looking for that all-important criterion: consistency. " Really, it's nearly impossible to do a loan," says Smith, " if it doesn't get [automated] approval because most lenders won't make loans that won't be approved by Fannie Mae or Freddie Mac, and they use these systems."

Computers won't make exceptions based upon a mortgage applicant's personal explanation or reasons for work and income disruptions. It's up to borrowers to use tactics like waiting for the right time to apply, concur experts. Here, a look at how borrowers may make their work "work" better for them:

Newly hired

The economy's two big problems - unemployment and a sluggish housing market - have bumped into each other, with anyone who's been recently pink-slipped impacted if they apply for a mortgage. That's because lenders want to see two years of tax returns, explains Cecala. If you were unemployed in 2008, for example, and apply for a mortgage this February, your tax returns from 2008 and 2009 may not allow you to qualify, since reported income for the year with unemployment is too low for the size loan you're requesting, Cecala illustrates, noting many people who are waiting until April after they submit their 2010 return to apply for a loan.

Lenders also will require anyone who's been out of work for six months or longer to be back on a job for six months at least, adds Bill Schwietz, president, Minnesota Association of Mortgage Brokers.

Patience is also the key to approval for those in new professions.

" Say you were an engineer and are now in sale," says Smith. " You'll have to wait a couple of years to show your income is dependable in your new career. But if you switched to a new engineering job, that doesn't make any difference."

Self-employed

" A person is self-employed if he is a sole proprietor or owns more than 25 percent of a firm," says Schwietz. The self-employed are eligible for many tax deductions, like for the use of a home office, but many don’t take them to qualify for a loan, relates Gene Fairbrother of the National Association of the Self-Employed.

Not only is the personal income statement important for the self-employed, but lenders may also scrutinize the profit and loss of the business itself, adds David Reed, author of " Mortgage Confidential" (Amacom Books, 2010).

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