Tip Income

Tip income is usually averaged for 12 to 24 months as well and may be less if the applicant has a history of tip income. Tax Returns are obtained for tip income to make sure this income has been disclosed to the IRS. A waitress, bar tender etc. It will depend upon AUS findings as well and the underwriter will determine the best approach of calculating. Tip income is also normally on the computer generated pay stub as tips and the pay stub will show the base hourly salary as well.

Alimony Income

A history of Alimony is also required with a copy of the divorce decree, tax returns and bank statements to see that it has been received on a continual basis and the income must have been received for the past 6 to 12 months to be considered as stable and provided it does not represent more than 30% of the income used to qualify for the loan and continue for the next 12 months. It must be proven it is received; not only that is has been awarded. This will fluctuate depending upon AUS findings as well and other factors.

Child Support

Child Support is looked at the same as alimony and to be considered as stable ongoing income which should have been received for the prior 6 to 12 months. The award document; divorce decree plus tax returns, if received for the prior year, and must have been received for past three months in some situations. Bank statements are required for evidence of receipt or a court document which indicates and documents the payments. Continuation is analyzed also and must continue for 12 months. This will also depend upon AUS documentation requirements and documentation may be less. Child support and alimony may also be grossed 125% as it is non-taxable.

Other types of income include but are not limited to: retirement income, pension income, disability income, social security income, unemployment compensation, income from part time jobs, second jobs, interest and dividend income.

Social Security Income: (Non Taxable Income) Social Security income is used with an awards letter, bank statements or tax returns. The income is grossed up by 125% for tax purposes. For instance is someone has SS income of $1500 monthly 1500 x 125% = $1875. The underwriter must also know that the client who is receiving this income is of age to continue receiving it. 62 and up at this time.

Disability Income: Disability income is treated the same as SS income. It is grossed up due to non-taxable to give the client the benefit like other income is calculataed. It is grossed up 125% also. **disability income must be verified with awards letter and evidence of continuation because the disability income must continue for the next three years to be eligible for qualifying purposes.

Part time job income requires a history of working a part time job and is averaged or calculated on the history and the continuance.

Second Job: the applicant must have worked a full time job and a second time job for a minimum of 12 months, normally to be described as a history. There are again exceptions to rules and dependent upon the circumstances and the continuation.

All allowable other income is looked at for history and continuation, to include those others listed above.

In conclusion, an underwriter will use the regular base income if it is sufficient to qualify you for the loan. Other income is only used when it is necessary to make the loan work if the base income is insufficient for the debt to income ratio. This process may not always rule but it is what I call best practice and the other income can be used for compensating factors if needed.