Home$tart - Income Calculation FAQ

This FAQ addresses a number of questions that Seattle Bank members often ask regarding the Home$tart Program income calculation process. While the FAQ provides additional information regarding this process, it does not address every possible scenario. For assistance with a specific enrollment, please contact the Community Investment staff at 206.340.2300.

What is the “Date of Qualification,” and how does it relate to the income documentation submitted with the enrollment?
The date of qualification is the date that you, as the member, qualify the household for participation in the Home$tart Program. This is the date that you would obtain pay stubs from the homebuyer(s) and calculate the household income in order to determine whether the homebuyer(s) meet the 80 percent area median income limit needed to qualify for Home$tart. Therefore, the date of qualification cannot be more than 30 days after the last pay stub provided and can never fall before the date of the first pay stub provided.

I have Home$tart applicants who have recently started new jobs or who have just returned from a leave of absence. Do I still need to submit two consecutive pay stubs?
For “Consistent Income – Regular Wages or Salary” and “Inconsistent Income” calculations, the Seattle Bank can only accept enrollments with two current, consecutive pay stubs that reflect the homebuyer’s normal work schedule. For example, if a homebuyer took unpaid leave, he/she must provide two consecutive pay stubs reflecting his/her regular, full-time schedule before the household may be qualified for the Home$tart Program.

How do I know if a homebuyer’s income should be calculated as inconsistent?
“Inconsistent Income” is generally considered to be wages from seasonal employment or compensation based on tips or commissions. Any of the following may indicate inconsistent income:

• If the two consecutive pay stubs provided vary by more than $100 per week (or $200 total in the case of a 24 or 26 pay period schedule), the homebuyer’s income may be inconsistent. In these cases, please confirm with the employer whether the homebuyer’s work is seasonal in nature (i.e., having high and low seasons throughout the year, with work hours and pay that vary based on those seasons; not necessarily periods of unemployment) or based on tips/commissions. Calculate the homebuyer's income as inconsistent if the income falls into either of these categories.
• Note the type of wages listed under the earnings section of the pay stub. If tips or commissions (or pay codes representing the same) are listed, the income must be calculated as inconsistent.
• Individuals paid on an on-call basis (i.e., work hours vary dramatically based on employer need) should be considered as having “Inconsistent Income.”

What amount(s) from the pay stubs should be included in the income calculation?
If the homebuyer has not received any bonus or profit sharing income within either pay period, use the total current gross amount from each pay stub provided (i.e., including overtime, shift work, etc.) when calculating homebuyer income. If bonus or profit sharing income has been received and is included in the total current gross pay, please subtract these amounts from the gross pay period earnings and calculate bonus/profit sharing income separately using the calculation on page four of the “Income Calculation Worksheet.”

How should I account for bonuses and/or profit sharing?
Please pay close attention to any bonuses and/or profit sharing indicated on the pay stub. If bonus/profit sharing appears under the year-to-date earnings, please provide written documentation from the employer (i.e., a signed Verification of Employment) which provides the homebuyer’s start date and current and prior year bonus/profit sharing totals. Using the information provided on the most recent pay stub and the Verification of Employment, determine the projected annual bonus/profit sharing income using the calculation provided on page four of the “Income Calculation Worksheet.” Please note: If bonus/profit sharing was received in the prior year, but has not yet been received in the current year, the bonus/profit sharing calculation must still be completed.

How do I account for periods of unemployment for seasonal workers?
If a homebuyer’s income is seasonal in nature and he/she received unemployment compensation during the previous year, include the amount of unemployment compensation received in the “Prior Year Total Income” field under the “Inconsistent Income” calculation and provide all required documentation. Please note that a household may not be enrolled in the Home$tart Program if either the homebuyer or co-buyer is currently receiving unemployment benefits. Therefore, please enroll homebuyers with periods of seasonal employment and unemployment throughout the course of the year only during periods of active employment.

How do I calculate income for homebuyers with pay schedules representing less than a full year (e.g., salaried teachers receiving pay over nine months instead of 12)?
Please provide official documentation from the employer with respect to any pay schedules representing less than one year (e.g., teaching contract, etc.). In the teaching example cited above, if sufficient documentation is provided, you may multiply the “Average Pay per Period” by nine months instead of 12 months.

Are students eligible for the Home$tart Program?
The preamble to the regulation which governs the Home$tart programs addressed this issue with the following statement: "Qualification of students: It is the Finance Board’s expectation that Bank policies for the homeownership set-aside program will be designed to assist AHP income-eligible households who, but for receipt of the AHP subsidy, would not be able to afford to purchase or rehabilitate a home. This would preclude qualification of students with part-time or no income while in school who ordinarily would have a reasonable prospect for a substantial increase in income exceeding the AHP income eligibility limit upon entering the workforce full-time."

What additional documentation may be required for extremely low income applicants?
Home$tart enrollees must have sufficient income to qualify for and afford a mortgage at the time of enrollment. In situations where the household income is calculated to be 30 percent of area median income or less, Community Investment staff will ask for clarification as to how the homebuyer will qualify for and maintain a mortgage. In addition, they will need to know the total monthly PITI (principal, interest, taxes, and insurance) payment for the homebuyer in order to calculate gross income devoted to housing payments.

Can I enroll a household if either the homebuyer or co-buyer is currently receiving unemployment benefits?
A household may not be enrolled in the Home$tart program if the homebuyer or co-buyer is currently receiving unemployment benefits.

How do I calculate income for and qualify teachers for the program?
Because many teachers are salaried, their incomes may be considered “Consistent Income–Regular Wages or Salary” and calculated as such. However, some teachers may additionally work odd jobs during the summer months, which may require that their incomes be calculated as “Inconsistent Income.” If you have questions, please contact Community Investment staff for help in selecting the most accurate calculation method.