Mortgage Underwriters must follow both DU and agency guidelines when it comes to documenting and calculating qualifying income for a loan transaction. Income guidelines may vary slightly depending on the loan program and the borrower’s employment profile. Below are some general tips for W2 income.
Documentation that may be required
Paystub with year to date gross earnings
At least 1 year’s W2
Verbal or full VOE
Salaried and fixed hourly income is calculated by averaging the gross year to date income
Variable hourly income is calculated by averaging 12 month history
Commission and tip income is calculated by averaging over 24 months
No transcripts are required for salaried, hourly, or less than 25% commission W2 income borrowers
Unreimbursed expenses do not have to be deducted from the gross pay for salaried, hourly, or less than 25% commission W2 borrowers
Overtime, and Bonus Income:
Overtime and Bonus can be used as effective income as long as it’s been received for 2 years and is reasonably likely to continue
Periods of less than 2 years may be considered as long as it’s been consistently earned over a period of at least 12 months and there are positive factors to offset the shorter history of receipt per underwriter discretion
Overtime and Bonus income must be documented by a full VOE
Declining overtime and bonus income cannot be used for qualifying income
Part Time Income:
FHA loans requires a 2 year history of working multiple jobs
Fannie Mae or Conventional loans will allow less than 2 years as long as it’s been consistently earned over a period of at least 12 months and there are positive factors to offset the shorter history of receipt per underwriter discretion
Joel Lobb (NMLS#57916)
Senior Loan Officer
American Mortgage Solutions, Inc.
10602 Timberwood Circle Suite 3
Disclaimer: No statement on this site is a commitment to make a loan. Loans are subject to borrower qualifications, including income, property evaluation, sufficient equity in the home to meet Loan-to-Value requirements, and final credit approval. Approvals are subject to underwriting guidelines, interest rates, and program guidelines and are subject to change without notice based on applicant’s eligibility and market conditions. Refinancing an existing loan may result in total finance charges being higher over the life of a loan. Reduction in payments may reflect a longer loan term. Terms of any loan may be subject to payment of points and fees by the applicant Equal Opportunity Lender. NMLS#57916 http://www.nmlsconsumeraccess.org/
— Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. The content in this marketing advertisement has not been approved, reviewed, sponsored or endorsed by any department or government agency. Rates are subject to change and are subject to borrower(s) qualification.