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 email@example.com.