- There are strict mortgage regulations on
How Do Underwriters Calculate Monthly Income Of Borrowers on government and conventional loans - Days of stated income home loans have long passed
- However, non-QM loans are alternative non-conforming loan programs that are becoming very popular
- Only qualified income will count to be used when calculating debt to income ratios
- Undocumented cash income cannot be counted
- Only adjusted gross income after unreimbursed business expenses can be used
- Due to only adjusted gross income being used as qualified income, business owners and self-employed borrowers often had trouble qualifying for a mortgage
- NON-QM Loans and Bank Statement Mortgage Loansfor self-employed borrowers are back
- Gustan Cho Associates is a national mortgage company licensed in multiple states with no overlays on government and conventional loans
How Do Underwriters Calculate Monthly Income: The Importance Of Qualified Income
Monthly income will be the most important determinant along with your credit scores that will determine how much of a home you can afford.
Other income such as part-time income, bonus income, overtime income can be used as qualified income as long as the borrowers had a two-year history and the income is likely to continue.
Hourly And Salaried Monthly Income
In order to be able to use a second full-time job, bonus income, overtime income, part-time income, or other income, the borrower needs two years of seasoning. The other income cannot be declining. The mortgage underwriter needs to make a call and has the discretion on whether or not the income is likely to continue for the next three years. Lenders need to make sure the borrowers will remain employed and pay their new home mortgage payment without any stress or financial difficulty.
Salary Wage Earners
In the event, if you are an employee who is on salary, this is the way you calculate your monthly income for mortgage calculation.
If the salaried employee is paid every two weeks, then the paycheck needs to be multiplied by 26 weeks and then divided by 12 months to yield the monthly gross income to qualify for the mortgage loan.
Overtime, Bonus, Part-Time, And Commission Income
Other income such as overtime income, bonus income, part time income, and commission income is more complicated to qualify. The mortgage loan originator needs to make sure he or she qualifies it the same way the mortgage underwriter will.
Overtime income, part-time income, bonus income, or commission income will have the likelihood of continuing for the next three years.
How Do Underwriters Calculate Monthly Income On Overtime And Other Income Guidelines
What the mortgage underwriter is going to request is a verification of employment from Human Resources. On the VOE, it will request to Human Resources representative to state the overtime. It will also ask if other income is likely to continue and the likelihood it will continue for the next three year is very likely:
In the event, if the overtime or other income is last in the most recent year than the previous year, then the most current year overtime income or other income is only used and it is divided by 12 months to determine the monthly income.
How To Calculate Monthly Income For Self Employed Mortgage Borrowers
If the borrower is self-employed or a 1099 wage earner, two years of tax returns and income as 1099 is mandatory.
W-2 Only Income Mortgage Loan Program
Home Buyers who need to qualify for home loans with a mortgage company licensed in multiple states with no overlays on government and conventional loans, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at [email protected] The team at Gustan Cho Associates are available 7 days a week, evenings, weekends, and holidays.