How Do Underwriters Calculate Qualified Income In Mortgage Qualification

This BLOG On How Do Underwriters Calculate Qualified Income In Mortgage Qualification Was UPDATED On August 26, 2017

To qualify for a mortgage loan, the mortgage lender will evaluate credit scores, credit history, credit report, debts, liabilities, assets, and income.

  • All of these factors will play an important role in mortgage loan approval and closing on 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. 
  • There are many sources that can be used for qualified income in mortgage qualification.
  • Examples are social security income, pension income, part time income, bonus income, seasonal income, child support, royalty income, and other sources of qualified income in mortgage qualification.

Gaps & Extended Periods Of Unemployment

Borrowers who have been unemployed 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 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 recent paycheck stub and offer letter of employment.  
  • Mortgage lenders can get a verification of employment from the human resources department stating that the chances of future employment and likelihood that the employee will be employed for next three years is good.
  • Borrowers who have been unemployed for more than six months need to be on 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 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 a 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 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.

Social Security, Pension And Disability Income

Social security income and pension income can be used for income in mortgage qualification.

  • Social security income are normally grossed up by 15%. 
  • For example, if borrowers 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. 
  • If pension income is not taxed, your pension income can be grossed up by 15% as well an 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 The Gustan Cho Team at USA Mortgage at 1-800-900-8569 or text us at 262-716-8151 for faster response or email us at gcho@gustancho.com.

Related> 2015 Income Guidelines For Home Loan

Related> Income Qualification For Mortgage

Related> Mortgage Loans And Income Qualification

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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