How Mortgage Underwriters Qualify Income When Underwriting Borrower
This BLOG On How Mortgage Underwriters Qualify Income When Underwriting Borrower Was UPDATED On December 11th, 2017
One of the most important factors in getting qualified for a residential mortgage loan is credit and income and your employment history. Home Buyers with great credit but no qualified income cannot qualify for a mortgage. However, home buyers with documented qualified income but bad credit can qualify for a mortgage as long as they meet the minimum credit scores. Documented income is extremely important when it comes to qualifying for government and conventional loans. There are various ways how mortgage underwriters qualify income when underwriting borrowers.
- Cash income is non existent and does not count in mortgage qualification
- Self employed income requires a minimum of a two year history of tax returns
- If the borrower has consistent or increasing adjusted gross income on their tax returns, then the past two years income is averaged
- Self employed borrowers who have declining tax returns, then the lower of the two year’s gross adjusted income is taken into account for income qualification and the two years tax returns are not averaged
- One time write offs on tax returns can be exempted if proof can be provided
- Gaps in employment is allowed
- For W-2 employees, mortgage lending guidelines require six months on the job as a full time employee if the borrower has been laid off or off work for more than six months
- And a verification of employment from the employer that the borrower will have continued employment for the immediate and distant future is required
- All lenders want to see that the borrower continuation of employment is likely to continue for the next three years
- There is no job longevity period per mortgage lending guidelines if the borrower has been unemployed or out of work for less than six months
- A mortgage loan borrower can be unemployed for five months and get a new full time job and still qualify for a mortgage loan as long as he or she can provide 30 days pay check stubs
How Mortgage Underwriters Qualify Income And View Employment History
Many mortgage loan borrowers get confused when mortgage lenders ask for a two year employment history. Mortgage Guidelines do not require that borrowers be on the same job for the past two years. Borrowers can have multiple job the past two years as well as gaps in employment.
- Two year employment history means a two year work history excluding periods of unemployment
- Being unemployed for over a year is fine and as long as the borrower have a full time job currently but have a two year work history mortgage borrowers can still qualify for a residential mortgage loan
- As mentioned earlier, borrowers who have been unemployed or out of work for more than six months, they need to prove that they have been employed six months as a full time employee for at least six months in their current full time job
- During the two year period, borrowers can also have multiple jobs
- Two year employment history just merely means that borrowers need to prove that they had an overall two year employment work history
- Mortgage Borrowers who have not been employed for two years but were in school full time, time in school is counted as employment history
Lender Overlays And How Mortgage Underwriters Qualify Income
Fannie Mae and FHA mortgage lending guidelines state that as long as borrowers are currently employed full time and have been off work less than six months, they qualify for a residential mortgage loan.
- It also states that if mortgage borrowers have been unemployed more than six months, they can qualify for a residential mortgage loan as long as they have been a full time employee for at least six months
- However, each individual mortgage might have their own lender overlays
- Lender Overlays are mortgage guidelines that are above and beyond those of mortgage guidelines imposed by FHA, VA, USDA, Fannie Mae, and Freddie Mac
- Overlays are lenders own rules that overrides Fannie Mae and FHA mortgage lending guidelines
- Borrowers who need to seek a mortgage lender that have no overlays on this issue if the lender they are consulting with has overlays on gaps in employment
Mortgage Borrowers who need to qualify for a mortgage with a direct lender with no mortgage overlays on government and conventional loans can contact The Gustan Cho Team at USA Mortgage at 262-716-8151 or email us at firstname.lastname@example.org. We are available 7 days a week, evenings, weekends, and holidays.
Gustan Cho NMLS ID # 873293