How Mortgage Underwriters Qualify Income When Underwriting Borrower
This Article Is About How Mortgage Underwriters Qualify Income When Underwriting Borrower
One of the most important factors in getting qualified for a residential mortgage loan is credit and income and employment history. Home Buyers with great credit but no qualified income cannot qualify for a mortgage. Homebuyers 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.
What Is Qualified Sourced Income?
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. 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 are allowed. For W-2 employees, mortgage 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.
Verification Of Income
And 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’s 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 borrower can be unemployed for five months and get a new full-time job and still qualify for a mortgage loan. This holds true as long as he or she can provide 30-day paycheck stubs. In this article, we will discuss and cover How Mortgage Underwriters Qualify Income When Underwriting borrowers.
How Mortgage Underwriters Qualify Income And View Employment History
Many borrowers get confused when mortgage lenders ask for 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 jobs for 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. As long as the borrower has a full-time job currently but has a two-year work history 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, 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. 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 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 for more than six months, they can qualify for a residential mortgage loan as long as they have been full-time employees for at least six months. Each individual mortgage might have its own overlays.
Overlays are mortgage guidelines that are above and beyond those of mortgage guidelines imposed by FHA, VA, USDA, Fannie Mae, and Freddie Mac. Lender overlays are lenders’ own rules that override Fannie Mae and FHA lending guidelines. Borrowers need to choose a lender that has no lender overlays on this issue if the lender they are consulting with has overlays on gaps in employment.
Borrowers who need to qualify for a mortgage with a direct lender with no mortgage overlays on government and conventional loans can contact Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates is available 7 days a week, evenings, weekends, and holidays.