Income Qualification Questions

Question:
An applicant has a 17 year old son who works. His income is excluded right now, but do I start counting it once he turns 18 sometime in the next 12 months?
Answer:
Yes. You correctly note that you do not count the employment income of children under the age of 18 years, as required by 24 Code of Federal Regulations (CFR) Part 5F (c)(1). Once the applicant's son turns 18, however, count the employment income for the remainder of months in the next 12 month period for which you are estimating annual household income. For example, an administrator may estimate a household's income on March 1st, 2011. The applicant's son will turn 18 in June, 2011. The administrator will not count the son's income until June, but will count his employment income from the date of his birthday until February 28th, 2012.

Question:
An applicant is separated, but not divorced. Do I count the income of the estranged spouse who is no longer living in the house as part of household income?
Answer:
Florida law does not legally recognize separation. When an applicant is married and separated, count the estranged spouse’s income as part of the annual household income. Consult with your city or county attorney to determine if the spouse should sign any SHIP recapture provisions. This is the rule that also applies to cases of temporary separation when a spouse does not live in the house due to military service, attendance in college, offshore work, or other instances where a family member is temporarily residing in another location. In some situations, it seems clear that the applicant has no plan to reunite with the estranged spouse and the separation is permanent. In such a case, the applicant is essentially divorced for purposes of SHIP income eligibility determination. The spouse’s income should not be counted as part of the annual household income, and the spouse should not be counted as a household member. The Florida Housing Finance Corporation’s compliance division has noted that local housing administrators have the discretion to determine if an applicant’s separation is permanent. In making this determination, the administrator should obtain as many details as possible to document that the SHIP recipient’s separation is permanent. In cases of permanent separation, for example, the applicant and the estranged spouse maintain separate residences and file separate tax returns. Documentation that the separation has been ongoing for a long time further strengthens the case that the separation is permanent. The Florida Housing Coalition and the compliance division at the Florida Housing Finance Corporation (call 850 488-4197) are available for consultation on this subject. In cases where a separated applicant is requesting SHIP assistance with purchasing a house, Florida’s joint property laws should be considered. Unless legally divorced, the State’s laws will likely entitle the estranged spouse to legal claim of ownership of the new house being purchased. SHIP administrators should ensure that applicants are aware of this.

Question:
An applicant's adult son is reluctant to sign an affidavit of unemployment. On the affidavit, the applicant indicates whether or not he is seeking employment. If he is looking for work, the form asks what rate of pay he anticipates he will receive with his new job. Do I have to wait until the individual gets a job before I can fully count anticipated income and determine if the household is income eligible for assistance?
Answer:
He is not required to sign an affidavit of unemployment. Administrators can use the information on the applicant's signed SHIP application to as the sole documentation that an adult living in the household is unemployed. Several local jurisdictions across the state may currently be using an "unemployed affidavit" form. This is not a requirement of the SHIP program. You should, however, check for and document all sources of income that the unemployed adult is providing to the household, including social security and unemployment compensation. In addition, if the applicant is a home buyer, you can verify the employment information provided in the SHIP application compared to the first mortgage lender's application. Administrators determine income eligibility by annualizing only sources of income that are currently verifiable. Even if an unemployed individual anticipates that he or she will soon secure a new job, it is not necessary to delay the income certification process until this occurs and can be documented. If, however, you learn that an unemployed member of the household has started a new job before the household has received SHIP assistance, you are obligated to count and verify the income from this employment.

Question:
Anticipated Gross Annual Income: Just how much do we have to anticipate?
Answer:
The SHIP program calculates anticipated income rather than past income, and there is a reason for this. It was thought to be better for the applicant not to be penalized based upon previous circumstances which may have changed significantly. Consider, for example, an applicant who is starting his/her life over after a divorce and now has only one wage-earner in the household.
How do you document an applicant’s income before it is received? Project what an applicant’s income will be over the next 12 months. Annualize current income. As far as the rule is concerned, what someone is currently earning is what they will be earning over the next 12 months. It does not matter that they received a three percent raise last April - you do not assume that they will get another raise next April. The only exception to this is if you have verification that an application's income is about to change, such as an employer verifying that the applicant will receive a $0.50 per hour raise in four weeks. In this case, you would calculate four weeks at their current rate, and 48 weeks at their new rate, and add the two numbers together. The sum is the anticipated annual income.
In some instances, the information provided by an employer on the Verification of Employment (VOE) form may seem to contradict information available from a pay stub. The stub may indicate, for example, that overtime is a regular income source, while the VOE does not include any income from overtime. Remember that pay stubs are not the proper documentation for determining an applicant's income in the next 12 months. Pay stubs are not required to be included in a SHIP applicant's files. However, when they are included in there and when they provide information about overtime that contradicts what you are reading on a VOE form, you should contact the employer and amend the VOE form with some explanation for the discrepancy in information.

Question:
How should I estimate overtime? Should I use the information I have from what is reported on the household’s income tax return?
Answer:
Do not use a tax return to obtain overtime estimates. It only provides information about past overtime earned and you need an estimate of overtime to be earned in the next 12 months. Instead, you must rely on the estimated overtime information provided to you by the employer on the Verification of Employment form. Verification forms are the primary source documentation for determining an applicant’s annual income. The questions on this verification form should ask the employer to estimate all of the earned income that the applicant is expected to receive during the next twelve months. The form should include a question specifically asking about the amount of overtime that is expected to be earned. For some jobs, it is easy for the employer to provide an estimate for future overtime, based on the applicant’s past history of receiving overtime and the employer’s knowledge of future work to be performed. In other cases, however, an employer may indicate on the verification form that it is not possible to estimate future overtime. In such a case, you may wish to call the employer, explain the importance of fully estimating the applicant’s income, and request that he or she make an informed guess about overtime earnings. If the employer is still not able to provide an estimate of overtime after this discussion, however, do not count any overtime earnings.

Question:
Do I count earned income tax credits as a source of income when determining the household's annual income?
Answer:
No. This subject is addressed in HUD Handbook 4350.3, one of the guidebooks to outline the federal regulations that govern income qualification topics for the SHIP program. Section B of the handbook lists what income sources are excluded from annual income. Item 19(i) states:"19. Income excluded by Federal statute: Any earned income tax credit to the extent it exceeds income tax liability. (26 U.S.C. 32(j))"

Question:
Do I delay the income eligibility process until the applicant learns whether or not she is hired for the new job?
Answer:
It is not necessary to delay the income eligibility process. Proceed with the collection of income verification forms and then sign an income certification form if the household is currently income eligible. You may learn that the applicant has received a higher paying job at some time before the applicant has been assisted with SHIP funds (i.e. before the applicant has signed a rehabilitation contractor's construction contract, or the applicant has closed on a loan, or before SHIP funds have been provided for some other form of assistance to the household). In such a case, you are obligated to re-verify and re-certify the applicant's income to determine if the household is still eligible for assistance.

Question:
I know that I only count the first $480.00 of earnings for each full-time student in a household who is 18 years old or older. What if the student is receiving Social Security Disability as income? Does this rule still apply or do I count the full amount of the disability benefit?
Answer:
The rule to which you are referring is outlined in 24CFR, Section 5.609(6)(4). It only directs you to count the first $480.00 of employment earnings for full time students. Social Security Disability, on the other hand, is a source of entitlement income. 24CFR notes that you must include in your income calculations "the full amount of periodic amounts received from Social Security, annuities, insurance policies, retirement funds, pensions, disability or death benefits, and other similar types of periodic receipts" for all family members. So you must count the full amount of the Disability payment in this case.

Question:
An applicant was income certified a year and a half ago for our jurisdiction’s Purchase Assistance Program and is now applying for the Single Family Rehabilitation Program. Does the applicant have to be re-income certified?
Answer:
The SHIP monitors and Florida Housing’s compliance staff indicate that an applicant
must receive assistance within one year of the date of the Income Certification Form. Therefore, a re-certification of income will depend on the date of the Income Certification Form associated with the Purchase Assistance Program and the schedule of the rehabilitation work to be completed. It sounds like a re-certification will need to be completed.

Question:
I understand the policy for documenting child support income. Most of our applicants have initiated a file with the Child Support Enforcement Office, which provides a printout of the money it has collected for those people who have initiated files with their office. This printout often shows that no money has been collected. The Child Support Enforcement office can only provide this printout for individuals who have initiated a file with their office. For this reason, can I use this printout as the documentation that the applicant’s child support is not being received and that the applicant has made every attempt possible to collect it?
Answer:
Yes, you can use this printout. The Coalition has discussed this issue with the compliance office at the Florida Housing Finance Corporation. FHFC staff confirmed that the Child Support Enforcement Office’s printout is acceptable documentation that a file has been initiated and that child support is not being received. Briefly stated, the SHIP program requires that the full amount of court-ordered child support be counted as household income regardless of the amount being received. This is true unless you can document that the applicant has exhausted all legal means of obtaining the support. If all legal means have been exhausted, then the actual amount received is counted as income. Your question pertains to the specific documentation that you must collect to document that child support is not being collected and that all legal means of obtaining the support have been exhausted. In Florida, there are two methods available to pursue child support that is not being received–filing a contempt of court hearing or establishing a file with the office of Child Support Enforcement. Either option meets the requirement of exhausting all legal means. If an applicant is pursuing the first option, the applicant must provide the SHIP office with documentation that a contempt of court hearing has been scheduled. If the applicant is pursuing the matter through Child Support Enforcement, adequate documentation is the printout mentioned above or a letter from the Child Support Enforcement Office stating that the applicant has initiated a file. By including any of this documentation in your file, you are demonstrating that the applicant has exhausted all legal means of attempting to obtain the child support. If, after all legal means have been exhausted, the support is still not being received, it is not included as income.


Question:
Should I count non-court ordered child support as a source of income? If I do count it, what documentation would be acceptable to verify this income source? Answer:
You should count non-court ordered child support only when the household is actually receiving it regularly. Document the income source by having the provider of the child support complete a verification form for regular cash contributions. This process is in contrast to the policy for court ordered child support, which states that the full amount of court ordered child support must be included in household income whether or not it is regularly received by the household. The difference in these policies results from the court’s involvement in court ordered child support. A divorce decree is a legal document mandating the payment of child support. A household that is not receiving court ordered child support has legal recourse to force payment of the support. They can schedule a contempt of court hearing or contact the Department of Revenue’s Child Support Enforcement office (the contact phone number is 1 (800) 622-5437). Court ordered child support that is not being received can only be disregarded once you document that a household has exhausted legal means for trying to obtain the support. In contrast, there is no legal document associated with non-court ordered child support. If it is not being received, it is simply not a source of income to be included in overall household income.


Question:
If a person does not live in a unit to be assisted, but his or her name appears on the deed as a co-owner, do we count his or her income toward the computation for income eligibility?
Answer:
No, unless the co-signer is an estranged spouse, because the State of Florida does not recognize legal separations. The income guidelines state that if someone is permanently removed from the household, you do not have to count his or her income, but the applicant must provide proof that the spouse is no longer a part of the household by providing a copy of the divorce decree or restraining order. In the case of a parent or other relative who co-owns the unit but does not legally reside there, use only the incomes of those persons residing in the unit. However, if a lien is to be placed on the property in the amount of SHIP assistance, consult with your city or county attorney, since you may likely want the co-owner to sign the lien as well as the resident co-owner.

Question:
Is combat pay counted as part of household income?
Answer:
It is not counted. This issue is address in Chapter 25, Part 5 of the Code of Federal Regulations, commonly referred to as “24CFR”. The Code is used by almost all SHIP communities to outline the income sources that are and are not included in the calculation of annual household income when calculating SHIP income eligibility. Section 5.609 (b)(8) specifically notes that household income must include “all regular pay, special pay and allowances of a member of the Armed Forces (except as provided in paragraph (c)(7) of this section). Paragraph (c)(7) then outlines that “the special pay to a family member serving in the Armed Forces who is exposed to hostile fire” is not included as part of household income.

Question:
One of my SHIP home buyer applicants is participating in a housing authority Section 8 Homeownership Voucher program. Through this program, the housing authority will pay a certain portion of the monthly mortgage payment. Do I count this mortgage contribution as a source of income when determining the household's annual income?
Answer:
No. Staff at the Florida Housing Finance Corporation reviewed the information provided by Fannie Mae and HUD for the Section 8 Homeownership Voucher program. The information included a recapture agreement with a loan forgiveness clause that the applicant must sign to receive the Section 8 subsidy. The compliance staff concluded that this mortgage contribution is a deferred payment loan and that it should be excluded from annual income. The main intent of the Section 8 Homeownership Voucher program is to help increase the affordability of a low income home buyer's mortgage payment. Counting the mortgage payment subsidy as a source of income might simply defeat the purpose of enabling an applicant to receive additional assistance from SHIP, since the additional income may push the applicant's income beyond the eligible range.

Question:
One of our applicants is seasonally employed. His employer has verified that he will work six months during the next 12 months. He has had a similar work schedule for several years. In the past, he has collected unemployment benefits in the other months of the year. However, since he is currently working for the employer and is not currently collecting unemployment, this is not a verifiable source of income. Should I still count the unemployment benefits as a source of income during the next 12 months, based on what I know about his income from past tax returns and past unemployment payment documentation?Answer:
Normally you would annualize income based only on what the applicant is currently collecting. During the 2000 session, the Florida Legislature changed the definition of "annual gross income" in Section 420.9071(4), F.S. from "projecting the prevailing annual rate of income" to calculating income by "annualizing verified sources of income" for the household as the amount to be received during the 12 months following the effective date of the determination. However, the compliance office of the Florida Housing Finance Corporation recognizes that the applicant in your situation will likely receive unemployment payments some time in the next 12 months. If the seasonal employer can provide a statement verifying the applicant's start and stop dates of employment, and you have tax returns from prior years verifying the amount of unemployment benefits, you may use these sources to calculate his anticipated income.

Question:
Income from a Business: A husband and wife are applying for purchase assistance, and their scheduled closing is ten days from now. The wife has a regular job and the husband is starting up a business. He anticipates that the business will soon become profitable, but it is currently not earning income. How do I document this situation and how much income should I count from this business?
Answer:
You should count no income from the business, since it is currently not earning a profit.
On any given day when we work to complete the income qualification process, we are simply taking a ‘snapshot in time’ of household income. Income increases or decreases with some regularity—the wife may soon receive a raise, or may lose her job. The business may soon turn a profit, or may fail for lack of income. Your task is simply to document the current situation. Currently, you cannot estimate any particular income from the business in the next 12 months. Consider a similar situation: an applicant’s 18-year-old son has recently graduated and is looking for a job. Although he tells you that he anticipates locating a job earning $25 an hour, he is currently unemployed and there is no guarantee that he will earn that anticipated wage. Guidance on this matter is provided in the definition of “annual gross income” in the SHIP Statute, which notes “counties and eligible municipalities shall calculate income by annualizing verified sources of income for the household.” The son cannot verify income from a job that he does not yet have. Similarly, your applicant cannot verify business income based on the current documentation of the business. You cannot count any business income to be earned in the next 12 months. In your situation, you should finish the income qualification process today and complete an income certification form. Count only the sources of household income that can be verified today, complete your income eligibility determination, and move on to preparing the applicants for their closing.



Question:
An applicant is applying for purchase assistance. I have signed his income certification
form and have provided an award letter indicating that he is a moderate income applicant with a household income of 81% of the area median income (AMI). We provide moderate income homebuyers with a maximum of $30,000 of purchase assistance,while low-income households may receive up to $40,000. Before the date of his closing, I received the new income limits chart from Florida Housing. The area median income for my county has increased slightly, and the applicant earns 79% of the new area median income. This applicant’s income has not increased or decreased at all since my initial intake and verification of income. However, should I now count him as a low-income household, and is he eligible for up to $40,000 of down payment assistance?
Answer:
Yes, the applicant’s household is low-income on the day when you provide assistance,
and is eligible for the higher level of down payment assistance. During the beginning months of each year, Florida Housing Finance Corporation distributes new income guidelines for purposes of determining income eligibility. You should use the new, updated income limits as soon as they are received, regardless of which allocation year the assistance comes from. The income limits charts are based on information on median family income provided by HUD. The latest estimates of median family income are based on 2000 Census data on family incomes. This has been updated annually since 2005 using Census American Community Survey data from approximately three million households to identify changes in state median family incomes.
Remember that it is likely that this situation is uncommon. Comparing the two most recent years of income limits charts, the area median income generally increases slightly by less than $2000 from year to year. In some unusual cases, AMI decreases. Because of the relatively small change in AMI, it should be uncommon for an applicant to be eligible for a different amount of assistance once the new income guidelines are received—even if your SHIP program offers a graduated series of maximum awards for
different income categories.
The SHIP income limits establish the maximum income for households that can be assisted. Yet each jurisdiction must identify the level of income where the market fails to meet each citizen’s need for affordable housing. If you believe that the income levels provided to you by Florida Housing do not adequately assist you in targeting assistance to those most in need, your commission can place additional restrictions on the local SHIP program. You may discover that even moderate-income households experience financial difficulty with housing costs. They may not qualify for enough mortgage money to purchase an average priced home in your community, for example. On the other hand, you may conclude that moderate-income households do not experience hardships, once you have considered the relationship between housing costs and income levels. Some communities have written their Local Housing Assistance Plans to indicate that SHIP assistance is only available to Low and Very Low-income households, not those with Moderate Incomes.


Question:
A staff person in our housing assistance department is income eligible and needs foreclosure assistance. Is there any rule that would prevent her from applying for SHIP assistance?
Answer:
This is not an uncommon question as it appears that similar cases have occurred in other jurisdictions. To avoid any concerns about conflict or favoritism, make sure that the applicant is held to the same application standards and overall qualification process as any other applicant. In addition, it is recommended that Personnel Policies and Procedures are reviewed since some jurisdictions prohibit employees from benefiting from their assistance programs.