Mortgage Loan With Overtime Income And Other Income

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Mortgage Loan With Overtime Income And Other Income

This BLOG On Mortgage Loan With Overtime Income Was Written By Massimo Ressa NMLS 227855

How Can You Qualify For Mortgage Loan With Overtime Income, Bonus Income, And Part Time Income

Income is a big factor in the total mortgage application process.

  • Mortgage lenders will scrutinize income, debt, and credit  
  • One of the mortgage qualifying factors that plays an important role in the mortgage approval process is the debt to income ratio
  • Every lender has their own debt to income ratio criteria
  • Some will have a dead set debt to income ratio cutoff of 43%
  • While other lenders like myself have a debt to income ratio limit of 56.9% on FHA loans and 50% on conventional loans
  • The only way of qualifying borrowers if their income to debt ratios exceed the lender’s maximum limits is reducing the loan size or increasing the income the borrower makes per month

Can Overtime Income Be Used?

One way of increasing the income borrowers makes per month is to see if the borrower makes overtime income.

  • If borrower has consistently made overtime income for the past two years and it reflects it on their W2s and tax returns, lenders will allow to use overtime income as an additional income source
  • If the borrower continuously works overtime at his present job and has not had a history of working overtime for the past two years, the overtime income cannot be used
  • Same goes with second jobs
  • Many American workers have part time jobs
  • Part time job income can be used as additional income only if borrower has had the part time job for the past two years
  • If the borrower only had the job a short period of job and the job is promising for continued employment, the part time income cannot be used for the mortgage underwriting process

How Underwriters Calculate Mortgage Loan With Overtime Income

Mortgage Underwriters will average the past two years of overtime income and come up with a monthly average if the overtime income for the past two years are the same or on an increasing trend.

  • If the overtime income is declining the most current year than the previous year, then the most recent declined income will be used
    • It will be averaged by 12 months to come up with a monthly average gross overtime income
  • If the overtime income is substantially lower the most current year than the preceding year, then the underwriter may not count the overtime income
  • It is up to the mortgage underwriter’s discretion on whether or not to use declining overtime income

About The Author Massimo Ressa

Massimo Ressa is the Chief Executive Officer and a contributing associate editor and writer for Gustan Cho Associates at Loan Cabin Inc. Massimo Ressa is a 15 year veteran of the mortgage industry. Massimo Ressa is an expert in all areas of lending and specializes in helping home buyers realize the dream of home ownership become a reality. Gustan Cho Associates at Loan Cabin Inc. is a national five star direct lender with a reputation of its no overlays on government and conventional loans. The Gustan Cho Team at Loan Cabin Inc. is headquartered in Lombard, Illinois.

We are experts in the following loan programs:

  • FHA, VA, USDA government loans with no lender overlays
  • No overlays on conventional loans
  • Special doctor’s mortgage loan programs
  • No doc fix and flip rehab loans
  • Non-QM Loans 
  • 95% Loan To Value Jumbo Mortgages
  • Closings in 3 weeks
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