As lenders are cracking down on underwriters, income is being calculated more rigorously. I wanted to share a couple of tips and do’s/don’t to help move loan processing along faster. YTD income is basically a thing of the past, and if they made more in prior years as is the case with state employee’s, do not average the older higher income in. Our LC’s income worksheets to help visualize increases and decreases in income.
Social Security Income
• If it is taxable income you cannot gross it up. If the borrower has another job, makes too much in retirement, or is under 62, you may find it being taxed. You will need to get the tax returns to prove it is not taxable if you are grossing the income up
Hourly Employees
• You cannot use YTD income. Get a VOE if they have OT or Bonus that you are using and show that it has been consistent for the past two years
• Depending on lender and loan type, you may be able to use current hourly rate if they received a raise or promotion. Take hourly rate X 40hrs (assuming they work a consistent full work week) X 52 /12
Salary Employees
• Use base salary. If using Bonus, get full VOE
• If 07 or 08 income is lower than current, get explanation from employer or VOE so underwriter doesn’t average last two years
Income Decrease
• Must use reduced amount. If they were out of work, prove it with full VOE. Average income over number of months they were at work for two years.
• Self-employed- Must use current lower amount, cannot average
Most importantly, when income is close, you must get full VOE’s completed prior to submission to underwriter to avoid decline’s and to ensure fast approvals. Many employers will not cooperate so it is imperative that you get your borrower involved and have them walk it in to HR or to their boss’s office to complete.
Do the work up front to avoid headache’s later!
Josh W. Harmatz
Voyage Financial Group
10304 Placer Lane
Sacramento, CA 95827
Office (916) 504-4554
E-Fax (916) 367-6703
www.voyagefinancialgroup.com
