Income For Qualifying For Mortgage
Income for qualifying for mortgage is one of the most important factors in getting a mortgage loan approval. All income for qualifying for mortgage needs to be documented income and mortgage lending guidelines have specific guidelines when it comes to income qualification. Cash income does not count and cannot be used to qualify for a mortgage. All income for qualifying for mortgage needs to be verified with the Internal Revenue Service. Income that can be used as income for qualifying for mortgage are hourly income, salaried income, social security income, pension income, disability income, child support income, alimony income, part time income, over time income, bonus income, and self employment income.
Home loan applicants who are W-2 full time wage earners can qualify for a mortgage. Salaried wage earners income will be qualified by taking the salaried wage earner’s annual income and dividing it by 12 months. Hourly wage earners income will be calculated by multiplying the hourly rate by 40 hours and multiplying it by 52 weeks and dividing it by 12. Monthly gross income will be used when qualifying income for mortgage.
Part Time, Over Time, And Bonus Income
Part time income, overtime income, and bonus income can be used as income for qualifying for mortgage as long as there has been a two year history of the borrower getting part time income, overtime income, and/or bonus income and it was not declining income. A verification of employment will be required.
Social Security Income, Pension Income, Disability Income
Social security income, pension income, and disability income can be used as income for qualifying for mortgage. In most cases, these types of income can be grossed up as long as they get a net check and is not taxed.
Child Support Income And Alimony Income
Child support income and alimony income can be used as income for qualifying for mortgage as long as the likelihood for the next three years can be documented.
Self Employment Income
Self employment income and income from 1099 wage earners can be used as long as they have a two year history of steady self employment income and/or 1099 income. Two years of tax returns with all schedules are required in order for the mortgage loan underwriter to analyze the self employment and/or 1099 income.
Declining income and irregular income can become a big issue when it comes to income for qualifying for mortgage. Mortgage lenders want to see consistency in income. If a borrowers income was less one year but the following year the income was more, then there is no issue. However, if the borrower’s income is less the most current year, then the lesser income will be used and that year’s 12 months average will be used to calculate income. If the borrower’s income was less the older year and more the most current year, then the average of 24 months will be used for income qualifying for mortgage. If the borrower’s most recent year of income has been significantly less than the older year, then the mortgage loan borrower’s income may not be able to be used to the significant irregularity in income and a good letter of explanation needs to be be provided.