Qualifying For Mortgage Loan With Overtime Income And Other Income

Qualifying For Mortgage Loan With Overtime Income And Other Income

This BLOG On Qualifying For 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 criterias. 
  • 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 mortgage loans and 50% on conventional loans. 
  • The only way of qualifying a mortgage loan borrower a mortgage loan if their income to debt ratios exceed the mortgage 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 the mortgage loan borrower makes per month is to see if the borrower makes overtime income.

  • If the mortgage loan borrower has consistently made overtime income for the past two years and it reflects it on their W2s and tax returns, the mortgage lender 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 the mortgage loan 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 and 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 a guest writer for Gustan Cho Associates Mortgage & Real Estate Information Resource Center and 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. Massimo is in charge of The Massimo Ressa Team at Finance of America based in Lombard, Illinois and manages a team of mortgage professionals who 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 
  • 90% Loan To Value Jumbo Mortgages
  • Closings in 3 weeks

Massimo can be reached at mressa@financeofamerica.com.

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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