November 26, 2018
Last week we talked about piggy-back loans. Orion’s brokers know, however, that income is of utmost importance in obtaining a loan. But what kind of income? Orion considers many types!
Orion’s AEs remind our clients that bonus income typically fluctuates from year to year therefore, there are guidelines we use to consider the income. The industry standard is to receive this income source for two or more years. Generally, a statement from the employer that the bonus will probably continue, or a Verification of Employment (VOE) proving it.
There are some exceptions to the two-year income rule. If you have a client that is starting a new job, depending on the circumstances, the income may be used with a short, or perhaps no, history of employment at the new job. Typically, showing at least thirty days of income is needed. Ask your AE!
If you have a client with a recorded divorce decree or separation agreement that includes receiving alimony or child support, that income can be used once they can prove they have received six monthly payments in a timely fashion. The agreement must indicate the income will be received for at least three years after the date of the mortgage application. Note, the income must be received as one payment every six months and not six months' worth of payments upfront.
Orion’s brokers have many borrowers who have a pension or social security income. In general, they do not need to show a two-year history. Provide the award letter stating the amount of current income for social security. Pensions must be documented to show it will continue for at least three years.
Retirement accounts can be used for income if your client is taking regular withdrawals from the account. If the client has funds in a non-retirement account, in some cases a calculation called "asset depletion" may be used for qualifying income.
If your client is purchasing a new home and renting out their existing home, there are guidelines that can be followed to use the rental income from the current residence as qualifying income to offset the mortgage, tax and insurance payments. Be sure to talk to your Orion AE!