Fannie Mae & Freddie Mac – Expected/Future Income Options

Question:

I’m reaching out for clarification on Freddie Mac’s guidelines regarding future/expected income. Two options are provided, and I’m unclear about the details of option two. Option one is straightforward and aligns with the requirement for a new job to start no less than 90 days before the note date. However, option two (which only appears in Freddie Mac’s guidelines) states there is “no limit to the days after the note date” and that the job “must begin before loan delivery to Freddie Mac.” Please help me understand the distinction between these two options and how they work in practice.

Answer:

Option Two allows for a lender to close a loan on Future/Expected income with the offer letter BUT the lender cannot deliver that loan to Freddie Mac UNTIL the income has been verified to be what it was approved for income qualifying. So, a lender has to hold the loan and interim service it until the lender gets a paystub supporting the qualifying income. Then, and only then, can the loan be delivered to Freddie Mac.

So, basically, a lender could close and fund where there is no limit on days after the note date, which allows future employment to be more than 90 days from its start date. Of course, employment must start before the delivery date, with the income docs in the file to support the qualifying income. An example here might be a doctor coming out of residency in November of 2025 with a job starting in December 2025. Still, they need to buy their home now, and technically, a lender can use Option Two to manage that scenario.

The specific language from Option Two: “As of the Delivery Date, the income must be no less than that used to qualify the Borrower for the Mortgage.”

Many lenders do not like Option Two because it puts them in a tough spot if the income documents come in and do not support the qualifying income.

Our site has an excellent all-agency comparison chart on future/expected income, which is located at the Reference link below. You will find that both FNMA and FHLMC offer Option One and Option Two, with slightly different variances from each other. Both Fannie/Freddie allow for an option where the lender can hold the loan until the job starts and deliver it once the income documents validate the income used for qualifying.

Reference:
Subscribers have access to the Expected-Future Income – All Agency Comparison Chart, which is on the ‘Charts & Checklist’ page under ‘All Agency.’