How do I determine income for union workers?

Determining income for union workers comes with unique challenges. Unlike conventional employment, these workers typically take on a series of short-term assignments. They don’t job-hop in the traditional sense; rather, they’re dispatched by their union halls to work on projects, moving from one to the next as assignments are completed.

You’ll commonly see electricians, welders, carpenters, and other construction laborers in this group. Union-based work extends beyond construction. Generally, when one project ends, another is waiting, ensuring a steady, albeit variable, income.

What you need to consider

FNMA, FHLMC, FHA, VA, and USDA don’t currently spell out this type of employment in Allregs, but it generally agreed that it falls into rules for variable income. Variable income is documented in detail and you need to know these requirements to get your borrowers income qualified, or risk the possibility of an unstable loan.

 
How to qualify your borrowers income

Start with the 1003 Employment Section

On the borrowers 1003 I recommend that you put the employer as the borrower’s union hall, not the current employer shown on the paystub.  The reason I put the union hall is this is a more accurate representation of the borrower’s employment status.  The borrower probably has been with the same union hall and has had the same profession for years, and gets most if not all of their work from the union hall. 

You could make the argument that the union hall is not the employer (which is true), but putting down the current assignment the borrower is on is also not a fair representation of the borrower’s employment either.  If you put down actual employers over the last two years, it would appear the borrower is “job hopping,” and your 1003 will have pages of addendums to it.  I personally think it is better to have your verbal VOE confirm that the borrower is in good standing at the union hall and is on assignment than having a verbal VOE for every job the borrower has had in the last few years.

Use the trending income guidelines 

Follow the traditional method of income trending for variable hour or rate employees to choose the right income.  What the borrower currently makes per hour is not as relevant to what the qualifying income is versus what the borrower has been averaging per month.  Since the borrower will be assigned different jobs at different pay rates, it is much more accurate to get an average income worked up than use the hourly rate.

Another unique thing about union workers, If your borrower has also been getting unemployment income to fill in the gap between assignments, with two years’ history of the unemployment income receipt, you could use this to help qualify the borrower.

Confirm Proper History

Guidelines recommend a two year history for variable income borrowers.  The variable income guidelines do allow for less (12-24 months), but if a borrower is new to this type of profession, any less than two years’ becomes very risky.   

The last but very important pointer is, do not approve a borrower that is not on a current assignment.  There is no guarantee from the union hall how many jobs come up per year or when the borrower will get their next job. If the borrower cannot provide a current paystub that shows current work, wait until the union hall gets them started at their next position.

Summary

While you won’t find specific agency guidelines for “union income,” this approach aligns well with variable income rules, which most FAQs point to for handling union-based income. By following these steps and clearly explaining your income calculations on the 1008, you can confidently qualify union workers.

Guideline References
Fannie Mae B3-3.1-09, Other Sources of Income (05/01/2024)
Fredie Mac 5301.1  Employed Income 11/08/2024