You and Them

Written by Posted On Thursday, 01 February 2024 00:00

When you fill out your mortgage application, you may be surprised at some of the things being asked for. For example, you might be asked if you have any dependents living with you that are minors and if so, how many? Sounds kinda nosy but some loan programs do want to know if you’re supporting others besides you and your partner. But it’s important to note right off the bat that while the application is asking for information, you need to make a decent effort in providing that information but it may not always need to be exact, especially as it relates to numbers.

For instance, what’s your monthly income? Some applicants may enter their ‘take home’ pay because, well, that’s what’s used to pay the bills. But lenders want to know  your gross income, not your take home pay. Why? Because there are so many variables and potential adjustments to your income that might be made to adhere to lending guidelines. What types of income may be adjusted?

If you collect social security and  need that income to qualify, that’s non-table income. So too are SSDI payments. Certain retirement income may also qualify as non-taxable. Your lender will then ‘gross up’ this income by another 25% to help you qualify. Child support is non-taxable and will also be automatically increased by your lender. In the case of child support, your lender will want to verify how old the child is, how long such support will be paid and is there a history of timely child support payments evident. Even though you entered one amount, the lender will change that for you.

Got some outside income? Maybe a second business or any type of side gig? You can enter that on your application, but just like most other sources of income, this needs to have a two year history as well as a possible year-to-date profit and loss statement.  In this case, the lender will average that side gig income as well as the YTD money over the last two years and use that number to help qualify.

Finally, the lender  may need some clarification regarding what you put on your application. Is there a  second last name perhaps from a previous marriage or a name change from the past? The lender will ask for an explanation letter regarding why the name change and documentation for other changes. This is really no big deal, just send an email and provide an explanation of nothing more than ‘I got divorced and remarried.’

It’s okay for a lender to review a file once submitted. In fact, that’s the first thing done. Done to make sure what you put in the system jives with what loan program guidelines require and make any necessary adjustments. No biggie.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending. 

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country. 

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