Income

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Income

As mortgage guidelines have tightened over the last several years, income verification in particular has become more difficult. Income is one of the most important variables a lender will examine because it is used to repay the loan. Income is reviewed for the type of work, length of employment, educational training required, and opportunity for advancement. An underwriter will look at the source of income and the likelihood of its continuance to arrive at a gross monthly figure.

Salary and Hourly Wages
Calculated on a gross monthly basis, prior to income tax deductions
– Support Documents: Last 30 days pay stub(s)

Part-time and Second Job Income
Not usually considered unless it is in place for 24 straight months. Lenders view part-time income as a strong compensating factor.
– Support Documents: Last 30 days pay stub(s) & Last two (2) years W-2 forms for each applicant

Commission, Bonus and Overtime Income
Can only be used if received for 2 previous years. Further, an employer must verify that it is likely to continue. A 24-month average figure is used.
– Support Documents: Last 30 days pay stub(s) & Last two (2) years W-2 forms for each applicant

Retirement and Social Security Income
Must continue for at least 3 years into the future to be considered. If it is tax free, it can be grossed up to an equivalent gross monthly figure. Multiply the net amount by 1.20%.
– Support Documents: A copy of the award letter must be provided along with a recent check stub or copy of a bank statement if deposited electronically through direct-deposit.

Alimony and Child Support Income
Must be received for the 12 previous months and continue for the next 36 months. Lenders will require a divorce decree and a court printout to verify on-time payments.
– Support Documents: Provide a complete copy of your divorce or legal separation documents which documents alimony to be received. You will also need to show proof of receipt, through a printout from the courts, 12 months of cancelled checks or tax returns.

Notes Receivable, Interest, Dividend and Trust Income
Proof of receiving funds for 12 previous months is required. Documentation showing income due for 3 more years is also necessary.
– Support Documents: Brokerage statements for the last 2 years or previous two year’s income tax returns Schedule B-Interest and Dividend Income (most current statement to ensure underlying deposits still exist and earning at the same level).

Rental Income
The only acceptable source is from an investment property. A lender will use 75% of the monthly rent and subtract ownership expenses. The Schedule E of a tax return is used to verify the figures. If a home rented recently, a copy of a current lease is acceptable.
– Support Documents: This information can be provided in income tax returns for the past two years verifying rental income. The applicant should provide lease agreement.

Self Employment Income
Lenders are very careful in reviewing self-employed borrowers. Min. 2 years history of ownership is required. Lenders use a 2-year average monthly income figure from the Adjusted Gross Income on the tax returns. A lender may also add back additional income for depreciation. Self-employed borrowers often have difficulty qualifying for a mortgage due to large expense write offs.
– Support Documents: Last two (2) years Personal & Business Tax Returns (include all pages & schedules). A P&L and Balance Sheet is required if more than a calendar quarter has elapsed since the date of most recent calendar or fiscal-year end tax return was filed by the borrower with no exceptions

New Employment
If you do not have a two-year job history, a school diploma or transcripts & fully executed employment contract are required. In most cases Lender can consider your base income for qualifying purposes like normal. Bonus income for a new job will almost never be used.
– a school diploma or transcripts, fully executed employment contract & 30 days pay stub(s)