Income Guidelines To Qualify For Home Loan Programs Was UPDATED On May 7th, 2019
There are federal income guidelines to qualify for home loan.
- Days of no income verification to qualify for a home loan has long been gone and does not seem like it will ever come back in the near future
- There are strict income guidelines to qualify for home loan when it comes to qualifying for mortgage
- Cash income does not count
- There are strict rules and regulations on how types of income are calculated by mortgage underwriters
- The following types of income has its own income guidelines and requirements:
- self employment income
- 1099 income, part-time income
- overtime income
- bonus income
- retirement income
- The above types of income can be used to qualify for a mortgage loan
- Income guidelines to qualify for home loan is one of the most important factor in qualifying for a mortgage
- Borrowers can have low credit scores and prior bad credit and qualify for a home loan
- This is as long as borrowers have documented income
- However, if borrowers have the highest credit scores and the most perfect credit but cannot qualify with documented income, they will qualify for a home loan
- They can qualify by adding a co-borrower and/or non-occupant co-borrower with documented income
W-2 Income Guidelines To Qualify For Home Loan
W-2 income guidelines is the simplest types of income in qualifying for income when it comes to mortgage:
- Mortgage underwriters will require two years W-2s and the most recent paycheck stubs from borrowers
- Mortgage underwriters will also require two years tax returns
- Tax returns shows the adjusted gross income after deductions
- If there are no unreimbursed business expenses then the borrower’s current monthly wage will be used with no deductions
- Hourly wage earners monthly income will be calculated by taking the following steps:
- Take hourly rate multiply by 40 hours
- then multiplying it by 52 weeks
- then dividing it by 12 months
- For salary wage earners, the annual salary divided by 12 months will be used to calculate income
1099 Wage Earners Income Guidelines To Qualify For Home Loan
If 1099 wage earner, two years of 1099 income will be required. Most recent two years of adjusted gross income will be averaged to come up with the monthly income.
- However, if borrowers have declining income on most current year as a 1099 wage earner the following will be used:
- then the lowest 1099 income will be used
- it will be averaged by 12 months for income qualification
- that will be monthly gross income
- If the declining income is substantial from one year to the next, then the underwriter may disqualify the income altogether due to instability
Going From W-2 income To 1099 Income Guidelines To Qualify For Home Loan
For borrowers who have been a W-2 wage earner and have changed the status to 1099 Wage Earner, then there is a two-year seasoning requirement as a 1099 wage earner in order to qualify for a mortgage loan.
Going From 1099 Wager Earner To W-2 Wage Earner Income Guidelines To Qualify For Home Loan
Borrowers who have been a 1099 wage earner and changed jobs to a W-2 wage earner, then new W-2 income can be used to qualify for income.
- However, most lenders will require borrowers will need 30 days paycheck stubs in their new W-2 income full-time job before they can get a clear to close as part of their overlays
- Gustan Cho Associates does not have any overlays on government and conventional loans
- We do not require 30 days of paycheck stubs prior to closing
- 30 days paycheck stubs need to provide post 60 days after a home closing
- A written employment offer letter will be required by the employer
Part-Time Income, Overtime Income, And Bonus Income To Qualify For Home Loan
Part-time income, overtime income, and bonus income can be used as additional income in qualifying for a home loan.
- These types of income can be used as long as borrowers have a two-year history of part-time income, overtime income, and bonus income
- The likelihood of these incomes to continue for the next three years needs to be very likely
Other Income To Qualify For Home Loan
Alimony income, child support income, and royalty income can be used to qualify for a home loan as long as the likelihood of these income is likely to continue for the next three years.
Social security income and pension income can be used to qualify for a home loan. Many times social security income and pension income can be grossed up by 15% if social security recipients get a net check.
W2 Income Only Mortgages And Bank Statement Loans For Self Employed Borrowers
W2 Income Only Mortgages and Bank Statement Mortgage Loans for self-employed borrowers do not require income tax returns. W2 Income Only Wage Earners who do not have 1099 income, real estate income, or other own business can qualify for government and conventional loans with no tax returns and qualify with their W2 Income Only. Bank Statement Loans For Self Employed Borrowers are for self-employed borrowers. 24 months of bank statement deposits are averaged. That figure is used as borrowers monthly income. 10% to 20% down payment is required. The amount of down payment is dependent on borrowers credit scores. There is no private mortgage insurance required on bank statements mortgage loans for self-employed borrowers. There is no maximum loan limit. Mortgage rates depend on borrowers credit scores and down payment.