Gustan Cho The Mortgage Expert,
Publish On: August 5, 2021
This Article Is About Qualified Income In Mortgage Qualification Underwriting Guidelines
To qualify for a mortgage loan, the mortgage lender will evaluate credit scores, credit history, credit reports, debts, liabilities, assets, and income. All of these factors will play an important role in mortgage loan approval and closing on the mortgage loan. However, the most single important factor is income.
Borrowers can still get a mortgage loan approval with bad credit but cannot get a mortgage loan approval with little or no income. Income, by far, is the most important factor in mortgage loan approval. Borrowers can have credit scores north of 800 but with no income documentation, there will be no loan approval. In this article, we will cover and discuss Qualified Income In Mortgage Qualification Underwriting Guidelines.
What Is Qualified Income In Mortgage Qualification Underwriting Guidelines
There are many sources that can be used for qualified income in mortgage qualification:
Examples are the following:
- social security income
- pension income
- part-time income
- bonus income
- seasonal income
- child support
- royalty income
- other sources of qualified income in mortgage qualification
Gaps & Extended Periods Of Unemployment
Borrowers who have been unemployed for 6 months or less have no waiting period to qualify for a mortgage as long as they have a new full-time job.
- Borrowers do not have to be with the same place of employment in the past two years
- Borrowers do need an overall two-year employment history
- Borrowers can have multiple employers in the past two years
- Borrowers can have gaps in employment and qualify for a mortgage loan
- Borrowers who started a new job with a new employer, will qualify for a new mortgage by providing a recent paycheck stub and offer letter of employment
- Lenders can get a verification of employment from the human resources department stating that the chances of future employment and the likelihood that the employee will be employed for the next three years are good
Borrowers who have been unemployed for more than six months need to be on the new job for at least six months before they can qualify for a mortgage loan.
Part-Time & Bonus Income
Part-time and bonus income can be used as an additional monthly income if and only if the mortgage loan borrower has been receiving part-time income and/or bonus income for the past 24 consecutive months. Part-time and/or bonus income that is not quite 24 months might be used if the mortgage loan borrower can get a letter from human resources stating that the borrower’s part-time position is likely to be promising for the next three years.
Many human resources departments will be hesitant in stating such verbiage on verification of employment.
Child Support, Royalty Income, And Other Non-Traditional Income
Child support income, alimony income, royalty income, and other non-traditional income can be used as qualified income in mortgage qualification.
- Other income such as monthly subsidies from lawsuits can be used as additional monthly income in mortgage qualification as long as it will continue for the next three years
- Proof and letters of verification will be required
Qualified Income In Mortgage Qualification Underwriting Guidelines On Social Security, Pension And Disability Income
Social security income and pension income can be used for income in mortgage qualification. Social security income is normally grossed up by 15% on FHA Loans. Conventional Loans allow 25% grossing up of social security income. For example, if the borrower’s social security income is only $1,000 per month, that income can be grossed up by 15% to $1,150 and be used as qualified income in mortgage qualification purposes on FHA Loans. If pension income is not taxed, your pension income can be grossed up by 15% as well and used as qualified income in mortgage qualification. Permanent disability income can also be used and grossed up by 15%.
Mortgage Borrowers who have non-traditional types of income and need to qualify with a direct lender with no lender overlays, contact us at Gustan Cho Associates at 800-900-8569 or text us for a faster response. Or email us at gcho@gustancho.com.
Related> Income Guidelines For Home Loan
