There are several factors that are evaluated in the mortgage qualification process. Income, credit scores, prior credit history, assets, debts, and liabilities are all important factors taken into consideration by the mortgage lender’s underwriter in the mortgage qualification process. Every single factor will be closely scrutinized and evaluated by the mortgage lender’s underwriter in him or her granting a mortgage loan approval. However, the most important factor out of the ones listed above is the income factor. You can have the best credit scores in this planet and all the assets in the world but if you do not have income, you cannot get a mortgage loan approval. You can have bad credit and no assets and get a mortgage loan approval but with little or no income, the likelihood of you getting a mortgage loan approval is nonexistent.
Income in the mortgage qualification process
Prior to the real estate and credit meltdown of 2008, home buyers could qualify for a mortgage loan even if they did not declare a lot of income. The mortgage industry had mortgage loan products like no documentation mortgage loans or state income loans, which you state your income but the mortgage lender does not verify it. However, after the mortgage crisis and banking collapse of 2008, those products have evaporated overnight and new mortgage laws, regulations, and guidelines were implemented. Income in the mortgage qualification process is the single most important factor in getting a mortgage loan approval.
Credit, assets, debts, and liabilities in the mortgage qualification process
Credit, assets, debts, and liabilities all play an important part in the mortgage qualification process. A home buyer can qualify for a mortgage loan with prior bad credit as long as they have the income. I have wholesale correspondent mortgage lenders that will approve a mortgage loan borrower with credit scores as low as 530 FICO but again, they need to provide proof of income either by two years tax returns and two years of W2’s. You can have prior open collections and charge offs and still qualify for a residential mortgage loan without needing to pay off the old collection accounts and charge offs to get a mortgage loan approval, again, as well as you can have documented proof of income.
Home Loan With Judgment
A judgment is one of the worst negative credit items you can have on your credit report. I can get a mortgage loan borrowers approved for a mortgage loan with an unsatisfied civil judgment but again, they need to have proof of income. With judgments, a payment agreement has to be in effect and the judgment debtor needs to have been on a payment plan with a least two months of timely payments which needs to be verified via cancelled checks.
Types of income that can be used in the mortgage qualification process
There are various types of income that can be used in the mortgage qualification process. Of course the most common income that is used is wage income which is either salaried income or hourly income. Overtime income can be used as long as the mortgage loan borrower had consistent overtime income over the past two years. Overtime income under 2 years cannot be used in the mortgage qualification process, unfortunately.
Types Of Income That Can Be Used For Mortgage Qualification
Social security income can be used and can be grossed up by 25%. For example, if you are a recepient of social security income with a net monthly paycheck of $1,000, you can gross that $1,000 social security income by 25% to reflect your monthly income to $1,250.00 in the mortgage qualification process.
Pension income can also be used for mortgage qualification. Pension income can also be grossed up by 25% like social security income.
Rental income is another common income that can be used as long as you have declared the rental income on your income taxes for the past two years. If you own real estate, depreciation can be added as additional income.