What This Guide Covers
- How seasonal employment income is averaged and what triggers disqualification
- The employer letter requirements for seasonal agricultural workers
- How to document income that varies dramatically between growing and off-season
- FHA and conventional treatment of seasonal agricultural income
How Underwriters Qualify Seasonal Employment Income
Seasonal employment income qualifies under Fannie Mae and FHA guidelines as long as two conditions are met: the borrower has a two-year history of working in the same industry or seasonal occupation, and the employer confirms the work is expected to continue.
The income is calculated by averaging gross earnings over the most recent 24 months, using W-2s and tax returns. This averaging normalizes the seasonal pattern: a worker who earns $30,000 during harvest season and $0 during off-season qualifies at $2,500 per month (the annualized 24-month average), not at $30,000 for the months worked.
The critical documentation is an employer letter or Verification of Employment (VOE) that explicitly states the employment is seasonal and that the worker is expected to be re-hired for the upcoming season. A letter that merely confirms past employment without confirming re-hire expectations is insufficient.
For agricultural workers in Kern County who receive payments from multiple growers across a season, each employer may need to provide documentation, or the borrower may need to use a labor contractor's records to aggregate the season's earnings.
Required Documentation
- ✓Two years of W-2s from all seasonal employers
- ✓Two years of federal tax returns confirming seasonal income pattern
- ✓Written employer letter or VOE confirming seasonal work is expected to continue
- ✓YTD paystub from current season if application is during active employment period
- ✓Off-season employment records if the borrower works a different job in the off-season
- ✓Labor contractor certification if income is through a contractor rather than direct employment
What Most Lenders Get Wrong
- 1.Using only the income earned during the active season without annualizing over 24 months. A borrower who earned $45,000 in 8 months of seasonal work qualifies at $22,500 annually (not $45,000), averaged over 24 months.
- 2.Declining seasonal income because the borrower does not have year-round W-2s. The two-year history requirement applies to the seasonal pattern, not continuous year-round employment.
- 3.Failing to obtain the employer's re-hire expectation letter. Without it, the continuance requirement is not satisfied.
- 4.Not considering unemployment income received during off-season. Unemployment compensation does not qualify as mortgage income and cannot be counted even if the borrower consistently receives it between seasons.
Agricultural Income Specific to Kern County
Kern County produces more agricultural commodities than nearly any other county in the United States. Grapes, almonds, pistachios, citrus, cotton, and row crops generate significant seasonal employment. Many of these workers have stable, long-term seasonal employment relationships that meet the two-year history requirement easily.
The documentation challenge is typically threefold. First, seasonal agricultural workers often work for multiple growers or through labor contractors, creating a multi-employer documentation requirement. Second, earnings vary year to year based on crop yields and commodity prices, which can trigger the declining income rule. Third, some agricultural workers receive cash payments or have irregular pay periods that make clean W-2 documentation difficult.
For borrowers with clean W-2 documentation from one or two seasonal employers, the qualification path is relatively straightforward. For those with contractor-based or cash-heavy income histories, non-QM or bank statement programs may be a better fit.
Off-Season Income and How It Combines with Seasonal Earnings
Many agricultural workers in Kern County are not idle during the off-season. They shift to other industries, take temporary construction or warehouse work, or take on contract labor. This off-season income can strengthen a mortgage application when it is documented correctly.
If the off-season work is at the same employer or in the same industry over a two-year period, it can be averaged and included as additional qualifying income alongside the seasonal agricultural earnings. The key is that the off-season employment must also have a documented two-year history at the same job or employer type.
For borrowers who have a primary seasonal employer and inconsistent off-season work, the off-season income may not qualify. But the seasonal income alone may be sufficient to qualify if the gross earnings during the harvest months are high enough. The annualized 24-month average is what matters, not the monthly peak.
UsDA loans are also available to agricultural workers in rural Kern County areas around Wasco, Delano, and Arvin, and USDA income qualification follows the same seasonal income averaging methodology as conventional and FHA.
Declining Income in Agricultural Work
Agricultural income can fluctuate significantly year to year depending on crop conditions, commodity prices, and labor market factors. When a borrower's most recent seasonal earnings are lower than the prior year, the lender applies the declining income rule.
The declining income rule requires the lender to use the lower of the two most recent years of income, not the average. If year one was $38,000 and year two was $32,000, the qualifying income is calculated from $32,000 on an annualized basis — not the two-year average of $35,000.
For borrowers whose income declined due to a documented reason (an injury, a crop failure affecting a specific employer, a reduced work season), a written explanation and supporting documentation can sometimes address the lender's concern without invoking the full declining income limitation. The explanation needs to demonstrate that the decline was a one-time event rather than a trend.
If both years of income are lower than a prior high point, the underwriter still uses the two most recent years. The trend from three or more years ago does not improve the qualifying position.
I have helped agricultural workers in the Delano corridor, the Shafter area, and throughout the San Joaquin Valley qualify for mortgages for more than two decades. The income is real, the employment is stable in most cases, and the documentation path is clearly defined. The problem is that most loan officers outside of agricultural communities have never dealt with this income type and default to declining it. That is a documentation problem, not an eligibility problem.
Do you have seasonal or agricultural income and want to know if you can qualify?
Call Dan at (661) 342-9381. He will review your specific situation and documentation in a free call.