How do lenders count overtime for Colorado firefighters, deputies and dispatchers?

The planning numbers

Champions covers P.O.S.T.-certified peace officers, non-certified deputies, paid and volunteer firefighters, EMTs with a state certificate, 911 dispatchers, and corrections, port of entry and wildlife officers. Public safety pay often swings. The rules below decide how much of it counts.

Base pay vs. everything else

Lenders split your paycheck into two buckets.

• Base pay is your fixed salary or guaranteed hours. It usually counts from day one with a paystub and verification.
• Variable pay is overtime, callbacks, bonuses and extra shifts. It needs a history.

Shift differential, such as night or weekend premiums, is not named as its own income type in the FHA, Fannie Mae or Freddie Mac guides. Your lender confirms how it treats it. Ask for that answer in writing early.

The three agency rules

FHA

FHA counts overtime with a two-year history. It can count it after one year if you earned it consistently and it is likely to continue. The math is strict: the lender uses the lower of the two-year average or the most recent year's average. A drop is built in automatically.

Fannie Mae

Two years is recommended, and 12 months or more can work with other strengths. If overtime is steady or rising, the lender averages this year and last year. If it is falling, the lender must confirm it has leveled off before using it. Overtime lost to events outside your control can sometimes be set aside.

Freddie Mac

Two years is the norm, with 12 months possible when justified. The income must be likely to continue for three years. If it declined, the lender uses the current year, not the old higher level. A drop of more than 10% calls for extra review.

Worked example: a deputy in Weld County

Figures are illustrative. A deputy earns $68,000 in base pay. Overtime was $16,000 two years ago and $11,000 last year.

At CHFA's 55% ceiling, the gap between the top and bottom rows is about $619 a month of allowed debt. That can move your price range by tens of thousands of dollars. Try your own numbers in the affordability calculator.

Worked example: a firefighter near the income cap

Also illustrative. A captain in Douglas County earns $142,000 in base pay plus $38,000 of steady overtime. A spouse earns $24,000. Counted income would be $204,000, which is over the $196,810 Champions cap.

The cap is measured on qualifying income, meaning the income your lender uses to approve the loan. If the household qualifies without some of that income, ask the lender whether it can be left out of the calculation. Do not assume it can. Get the answer before you write an offer. If the household is over the cap, Colorado Champions is off the table, and SmartStep or HFA1 also stop at $178,920. metroDPA's FHA, VA and USDA tier goes up to $216,000 in its service area.

Volunteer firefighters with a day job

Champions accepts people who volunteer with a fire department, fire protection district or firefighting agency. The volunteer role gives you eligibility. Your day job supplies most of the income. Any stipend from the district is extra pay that needs its own history before a lender counts it. Ask the district for a letter confirming your service, since the lender must document it.

Job changes between departments

Moving from one sheriff's office to a city police department in the same line of work is usually fine. FHA asks for extra documents only when you have had more than three employers in 12 months or changed fields. Overtime at the new agency may need to rebuild its own history, so expect a lender to lean on base pay right after a move.

For gaps of six months or more, FHA counts current income once you have six months back on the job and a two-year work history before the break.

Corrections, dispatch and state agency pay

Colorado Department of Corrections officers, port of entry officers with the State Patrol, and Colorado Parks and Wildlife officers all qualify for Champions. State and county jobs often pay overtime in irregular blocks during staffing shortages or fire season. Those spikes help only if they repeat. A single heavy year followed by a normal one will usually be averaged down or set aside.

Dispatch centers often run rotating 12-hour shifts. If your schedule guarantees a set number of hours each pay period, ask the lender to treat those hours as base pay. Freddie Mac's guide shows a similar case for nurses: verified minimum shift hours treated as base pay even after a few months on the job. Whether your lender will apply that logic is its call.

Documents to gather now

1. Two years of W-2s and your most recent 30 days of paystubs.
2. Year-end stubs that split base, overtime and other pay.
3. Your certification: P.O.S.T., CDPHE EMT certificate, or a letter from the fire district.
4. Any letter explaining a drop in overtime, such as a staffing change.

Then check your eligibility for Colorado Champions and compare it with SmartStep's grant.

Questions

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