Income
False. Any non-salary personnel is hourly in nature and we we have to consider their reduced hours in the YTD income calculation.
If a customer is paid bi-weekly, how many pay periods should we use to calculate their annual income.
A. 12
B. 24
C. 26
D. 25
C. there are 26 bi-weekly pay periods in a year.
Borrower is recently divorced and is getting child support that will continue for 3+ years. Borrower has only received child support for 4 month. If the file is going LP, have we met the required proof of history LP requires?
No. Freddie Mac requires no less than 6 months of history of child support in order to use it for income.
If customer is self employed in an S-Corp, Currently (taking into consideration temporary COVID guidelines) what income documentation is required to be obtained? Select all that apply (note: not all requirements are listed).
A. personal returns (with all schedules and attachments)
B. business returns (with all schedules and attachments)
C. all business owners K1s
D. YTD profit & loss for the business
E. partnership returns (with all schedules and attachments)
F. most recent 3 months business bank statements in line with P&L timeframe
A, B, D, F. We do not need all the K1s if there are other owners in the business. Also, partnership returns are not needed as they are a different business entity than S-corp. They would not exist for this example.
If you have a paystub dated 12/27 showing a rate of $18.00 and 40 hours worked, and the YTD on the paystub showed $37,440. Does the YTD support using an income calculation of $18 x 40 hrs x 52 wks / 12 mo = $3120 a month
Yes. If you take the YTD figure of $37,440 / 11.87 months = $3154 which supports the pay rate x 40 hours a week.
Customer is paid $26.80 an hour, working 40 hours a week. Borrower was furloughed for 3 months, but recently returns to work full time again. The borrowers qualifying monthly income should be calculated at $26.80 x 40 hrs x 52 weeks / 12 months = $4645.33 a month.
False. Since the borrower is hourly and not salary, we have to consider the furloughed time in the income calculation. If the borrower was salaried and returns back full time, we then could use their full pay.
What is the recommended amount of time for variable income that Fannie Mae wants to be documented when using this type of income (ex. bonus, OT, commission, etc.)
A. 12 - 24 months
B. 24 or more months
C. Less than 12 months
D. Fannie doesn't allow variable income because its riskier.
A. Fannie recommends 24 or more months when using this income, but will also accept 12-24 if the application has other positive factors taken into consideration.
Based off the figures below, What answer would be best for this calculation of OT as of 07/16/20?
2018: $45,008 2019: $36,220 YTD: $36,850
A. $5651.84
B. $3384.50
C. $3945.46
D. $4423.84
The best choice would be C. This is using the previous year OT and averaging it with the OT that is trending upward in the current year ($36,220 + 36,850 / 18.52 mo = $3384.50)
Which of the following types of income require tax transcripts. Select all that apply:
A. Pension income
B. Self employed income
C. SS income (not grossed up)
D. SS income (grossed up 25%)
E. Rental income
F. W2 wage earner (not derived from SE business)
B, D, E.
True/False: if using pension income and we are using an award letter as verification of the income. Both DU and LP will also require recent proof of receipt.
False. LP previously required proof of recent receipt but now aligns with DU. If all we have is an award letter, that in itself is enough documentation to use the income. We no longer have to document recent receipt with an award letter.
When calculating income from a paystub, you can always include PTO, bereavement, holiday, auto allowance, and housing allowance.
False. While you can add back things like PTO, holiday, bereavement into your base pay calculation, Auto allowance and housing allowance required more documentation and history. These require 2 years history of receipt before it is acceptable to use for income.
What box on the w2 form form is used when calculating income from a previous year?
A. box 1
B. box 5
C. box 3
D. box 4
C. box 5
Borrower has only provided most recent paystub, and previous years w2s. But we have established he does work for a family member. Do we have enough documentation to calculate the income?
No. Even though the borrower is not considered self employed, working for family does require more than the typical w2 income. We would also require to get the borrowers previous 2 years tax returns.
TRUE/FALSE: LP will sometimes give you findings only requiring 1 year of tax returns if the business has been in existence for at least 4 years.
False. LP requires 5 years of the business being in existence before it will allow you to only use 1 year for consideration with the income calculation.
Borrowers bi-weekly salary was reduced due to COVID from $4500 per pay period to $3800 per pay period. confirmation from the employer and recent paystub show the borrowers pay has been changed back to the normal rate of $4500. What income can be used to qualify?
A. $3800 bi weekly
B. $4100 bi weekly
C. $4500 bi weekly
D. $4300 bi weekly
C. Since the borrower is salaried (not hourly) we can use the higher salary figure for income once we have documented the borrower has returned back to that higher salary figure.
A customer is considered to be self employed if they own 25% or more of a business.
True. Less than 25% we do not consider the applicant to be self employed.
If a borrower has a history of receiving bonus income, and currently shows bonus income in the current year through 08/31, but we don't know the frequency of the bonus. How many months should we use when calculating the YTD monthly bonus income.
A. 8 months
B. 12 months
C. 6 months
D. 2 months
B. because we don't know the frequency of how often the borrower is paid bonus in this scenario, we have to calculate the YTD bonus annually unless we can determine the frequency (ex. quarterly, semi-annually, etc.)
Yes/No: A borrower currently owns his primary residence. He is looking to purchase a new primary residence and turn his current home into a rental property. Borrower has no previous rental/management history and this file is going LP. Can the borrower use any positive rental income (if applicable) on his departing property?
No. without a minimum of 1 year rental management history, LP will only allow a primary converted to a rental to offset the liability but not use any income if there is some. DU will allow the additional income (if applicable) in this situation.
Alimony, Child Support, and separate maintenance income need to continue for how long in after the date of the mortgage application to be used as qualifying income?
A. 3 years
B. 6 months
C. 12 months
D. 4 years
A. these types of income have to be documented to continue for 3 years.
If a applicants previous year monthly base pay average is higher than the current years monthly base pay average, it is okay to average them together for your income calculation.
False. We should never average declining income to qualify. A YTD calculation would be most conservative and acceptable. If the declining income does not look to be stabilized, an LOX may be needed to explain the declining income.