Qualifying For Home Loan With Declining And Irregular Income
There are ways on how mortgage underwriters qualify mortgage loan borrowers who need home loan with declining and irregular income. Although home loan with declining and irregular income can be done, it all depends mainly on the mortgage loan underwriter underwriting the file. Many mortgage companies leave the income calculations for mortgage loan applicant’s seeking a home loan with declining and irregular income up to the mortgage loan underwriter, often called mortgage underwriter’s discretion. If you think you have a great case with proper documentation and the mortgage loan underwriter denied your file due to declining and irregular income, then you can have your mortgage loan originator appeal it to the mortgage underwriter and possibly get the mortgage underwriting manager involved for his or her opinion. Mortgage loan underwriters need to feel comfortable that the mortgage loan borrower’s income is stable and is likely to continue at the same wage level for the next three years. Declining and irregular income often raises red flags because of the insecurity of the potential earnings of the mortgage loan applicant. A mortgage loan underwriter can zero out the income of a mortgage loan applicant if he or she does not feel comfortable with the borrower’s recent income history in the past two years.
How Mortgage Underwriters Calculate Income
For self employed borrowers, mortgage underwriters will average the past two years of adjusted gross income. They will add the two years adjusted gross income and divide it by 24 months to get the monthly gross income. This is only if the two years adjusted gross income is similar or the most recent year is higher than the preceding year’s income. If the most recent year’s income is lower than the preceding year’s gross adjusted income is lower, then the mortgage loan underwriter will be using the lower most recent adjusted gross income (12 months ) and divide that by 12 and use that figure as the monthly gross income for the mortgage loan borrower in calculating the monthly gross income of the borrower. However, if the most recent year’s income is substantially lower than the preceding year’s adjusted gross income, a red flag will show up and the mortgage loan underwriter will go into an alert mode. One of the major concerns that the mortgage loan underwriter will be concerned about is if the borrower’s income and employment and/or business is secure. Why has the income drastically dropped? Is it a one time major loss? Has the business encountered technology issues? Have multiple competitors been created? Will the business income level increase to the original level? What is the gross potential of the business? These are some concerns mortgage loan underwriters may have and the mortgage loan borrower needs to make sure that they write a detailed letter of explanation to underwriter with supporting documents to convince them that they are secured with their business and income for now as well as the next three years.
Part Time Income
Part time income can be used for mortgage income qualification, however, there is a two year seasoning requirement. A mortgage loan borrower needs to have had the part time employment for at least two years and the likelihood of the part time job to continue for the next three years needs to be promising. The part time income needs to be consistent for the past two years as well as year to date or increasing. Declining part time income cannot be used. If the part time income is slightly declining, it is okay, however, mortgage loan underwriters will not count substantial declining part time income.
Overtime Income And Bonus Income
Overtime and bonus income can be used as additional income as long as the mortgage loan borrower has a two year history of receiving overtime income and bonus income and the overtime and bonus income is consistent and/or increasing in the past two years. Declining overtime income and declining bonus income cannot be used and most mortgage loan underwriters will not even average or count declining overtime income and bonus income.
Issues With Irregular Income
Regular and consistent income is the best predictor for future consistent income under the eyes of any mortgage lender. Mortgage lenders frown the fact that a mortgage borrower has irregular income because it is hard to predict the probability of future income. Mortgage loan borrowers with irregular income needs to explain via letter of explanation with supporting documents why they have had irregular income. Were they injured on the job? Did they take time off from their job due to personal issues or going to school? Is their employment seasonal? Did they request job transfer to a different position? Is the irregular income temporary or will it continue to decline? There are so many reasons why a mortgage loan borrower may have irregular income but with a good letter of explanation, everything is doable.