How Do Lenders Calculate My Income For My Home Loan? | Co/LAB Lending - YouTube

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Hi I'm Megan marsh of keystone alliance mortgage where we help home buyers purchase homes  

we help business owners buy buildings and most importantly we educate you about the mortgage and financing  

process you've ever wondered how much mortgage you could get approved for how much you qualify for

this video is for you and if you've never  wondered how much you'd get qualified for  

because it seems like it's a pretty simple  straightforward answer this video is for you

income  learning and understanding  the different types of income  

and how it's calculated in the mortgage process

is unlike any other qualifying factor  that goes on with things that you borrow

so there's lots of pieces to it  today i'm going to walk you through  

the different types of income and how it  can affect how much you are qualified for  

when you're ready to go buy  a home or refinance your home

so before we get started and i'm going to walk  you through the seven different types of  income

and how it affects what you are qualified for  I get a lot of phone calls our team gets a lot  

of phone calls where people are very confused  why they are not qualifying for the house that  

they're hoping to buy because let's say that  their rent is a thousand dollars but yet they  

can only get qualified for five hundred dollars  to purchase a home it doesn't make sense and  

my answer to you is that the the mortgage  industry buying a house it is very regulated  

and even though we're gonna go through these  seven types of income so that you understand  

how it affects what you get qualified for

there's a lot more to it than just the type of  income so keep in mind if you're gonna switch  

the type of income that you have if it's going to  change at all how much you qualify for can also  

change very quickly so let's dig in and  understand the seven types of income

the first type of income  that is the easiest  one to help people get qualified when they're  

purchasing a home is salaried income just  your standard income that doesn't change  

if you were to give and look at five different  pay stubs you're receiving the same amount in  

your paycheck every single week week in and week out and not only that if you are hourly which that  

is the second type of income that we're going to  go over hourly income also can be seen like salary  

so if you are paid hourly but every single week  you have 40 hours on that paycheck of yours it's  

treated just like salary income the underwriters  take the total amount that you make they divided  

by 12 months and that's what's used when you're  getting qualified to purchase refinance your home  

so one is salary two is hourly let's dig  a little bit further into hourly so unlike  

the salary income if you're hourly and your  hours change on a weekly basis so let's say  

you look at five pay stubs and one has 37  hours one has 40 hours one has 22 hours well  

no longer will that underwriter take your income  and divide it by those 12 months now Now if you're  

considered a variable income employee and  when you're a variable income employee  

income is looked at over a two year period which  this can cause some frustration sometimes for some  

of you because let's say you worked somewhere and you were only getting 25 to 30 hours in 2019  

and now in 2020 you are working those 40 hours  that you'd always wanted to work before and not  

only that you're getting overtime well now when  an underwriter is calculating your income they're  

going to average what you're making in 20 with  the year before and that is always a little bit  

confusing and hard to understand for people who  now are making a lot better money in their hourly

so keep that in mind and there are  some ways around it like getting  

a guarantee letter from your employer if  they will now guarantee you 38 hours a week  

every week that is one way to get around it the other thing with hourly if you are paid  

hourly there are some of you that work and  you have what's called shift differential  

let's say you have weekend shifts and  you get paid instead of twenty dollars  

an hour you get thirty dollars an hour on  the weekend well the same thing applies

the government has set all these rules and  standards to where they feel safe to what  

people are going to get lent and they want to see  that you've received that shift differential for  

at least the last two years and they're  going to average it over that two-year period  

and then last but not least some of you probably  work jobs where let's say it's a government job  

for example and let's say your hourly wage is  typically twenty dollars an hour but when you work  

on a job that is paid by the government you're  getting paid forty dollars an hour unless you've  

received that government higher wage for two  years they're gonna just use your base rate  

of twenty dollars an hour so it might seem  like you should qualify for more but it's  

because of these regulations that it kind of  brings down the amounts that you qualify for  

then the third type of income is bonus income and the fourth is commission income just like hourly  

the variable hourly same thing happens with your  bonus income in your commission income the rules  

that are out there which i do agree some of them  I think they're just not thought through correctly  

but they are the rules and we all have to follow  them but you have to be receiving bonus income and  

commission income for a two year period for it to  be average there are some little rules around it  

but if you switch jobs and let's say you are  working at a car dealership and you are getting  

commissions and then you leave that car dealership that you've been at for a few years and you go  

take a job let's say in pharmaceutical sales and  now you're getting a salary and bonus you cannot  

count that bonus income until you've been at that  new job for two years and even if you switch to a  

different dealership and you're getting paid  commission again you they will allow it but  

you got to be there a year before they'll start  using all these extra pieces of income that are  

wonderful for your family but it's not wonderful  for you when you're qualifying until some time  

has passed I remember when I first started in the  mortgage industry and I worked as a W-2 salaried  

employee and i'd been there for a year and the  next year I went and started to do mortgages  

and selling and I started getting commissions  and we went and bought a home and I could not  

be on the loan I had been at this employer for two  years but because I went from a  salary employee

to a commission-based employee they could not use my income until I had two years of that commission  

so it doesn't just happen when you're buying  it happens when you work in the industry too  

the fifth type of income probably one of the  most complicated types of income out there  

is for those of you who are self-employed  or you're 1099 so you work for yourself

your taxes do not come out of your paychecks so  1099 employees that's like your real estate agents  

your financial advisors it also is for your  self-employed as if you have a business that's  

incorporated and if you have a business that's  incorporated even if you're paying yourself  

a W-2 there are other rules around getting  qualified and it's probably one of the most  

challenging areas and it's the buyers that we  see the most and that we help the most because  

if you are self-employed depending on  how long your business has been open  

if you're profitable how profitable you are  the year before and the year that we're looking  

at right now it can really affect how much you  are able to borrow when it comes to banking and  

all the regulations we're going to do a separate  video for self-employed borrowers to try to dig  

in a little bit deeper to help you understand the  key for you if you're self-employed if you're 1099  

is to work with a loan officer who is  experienced working with self-employed  

borrowers and I always say looking for someone  who is self-employed themselves because then  

they're going to understand what you're going  through and what you do for your business and  

for how you pay yourself and then income type  number six is going to be those of you who are  

retired so if you're retired your income starts  to change and so you start getting into are you  

receiving social security are you receiving a  pension from a job that you worked at before  

do you get ira distributions so there's all  these other types of income and it's kind  

of a tricky thing because you're switching over  to being retired and receiving these income the  

key to it is that the underwriter needs to make  sure that this income that you're now receiving  

is guaranteed that you're going to get it for  at least the next three years so because of that

your social security is a guaranteed thing  

those ira distributions that you can now take  you have to be receiving them for two years  

but there is a little trick that you can  do and there is a loophole in the system  

if you have a big enough size retirement account  you can actually start taking consistent checks  

and getting a letter from your financial advisor  and as long as the equation that underwriters  

use that they can prove you're going to  have that income for the next three years  

you can use that and you can qualify for a  mortgage by just receiving two checks once a month  

two months in a row and then use that income and so my best piece of advice for you for all of you

who are retired and enjoying life is to reach  out to a loan officer and talk through with them  

the best way you can set yourself up to be able  to purchase refinance and do the things that you  

want to do so you can enjoy your retirement  and then number seven I kind of did like a  

catch-all a miscellaneous bucket because there  still is a lot of other types of income out there  

and this miscellaneous income that I see most  often would be your child support and your alimony  

it would be interest income let's say you have a  big portfolio you have millions of dollars in an  

account that you receive interest on those types  of incomes can be used and but there are rules  

around them so for child support and alimony just like everybody else they want to make sure that  

you're going to be receiving it for at least  three years so if you have let's say a child who  

is 11 years old and you have a child who's 17 and  that child support is going to be received until  

they're 18 that's why your loan officer or the  processor that works with them is going to ask for  

your kids birth certificates they want to see that  you're going to be receiving it and then they're  

going to want to see that you have been receiving  it so that you have someone in your life who is  

paying that child support to you for when you're  going to buy a house so that it's they know you're  

getting it and you're going to continue to get  it when you move you and your family into a home  

the interest income they're just going to look  at a two-year average but you can use that income  

and then the last bucket in that miscellaneous  bucket there is rental income what about getting  

having properties that you receive rental income  on that you have leases for that are rented out or  

what about if you want to run out the house that  you're currently living in to go buy another one  

we are also going to create another video for  this very specific topic but you can use rental  

income to qualify but it does have a lot of  rules around it make sure that you subscribe  

to the channel so that you get notifications  when we continue to update you on how the  

income's calculated and how your decisions  on your jobs are affecting you buying a house  

so also you can find us on instagram and you  can find us on facebook and we're always making  

sure that we're putting out content that  helps you move forward and become a home  

homeowner or buy a building for your business  and also don't forget there's a link in the  

description that you can go and click and go to  our website and speak to one of our loan officers  

about purchasing a home and how your  income will affect the whole process

you