Category: Credit Scores
“Grossing-Up” Non-Taxable Income
Did you know that you can gross up non-taxable income?
You may gross up non-taxable income for income qualifying purposes. The non-taxable income source being “grossed-up” must be documented.
Non-taxable income refers to types of income not subject to federal taxes, which includes, but is not limited to:
The percentage to be grossed-up varies by agency:
Now let’s talk about what it takes to qualify for a mortgage.
First off, you’ll need an adequate credit score, along with sufficient income to make the proposed mortgage payment each month.
Generally speaking, a credit score below 620 is considered subprime in the mortgage world and will make qualifying for a mortgage that much more difficult. But it’s still possible depending on lender and loan type.
If you’ve got previous foreclosures on your credit report, things will get even more problematic and you may not even be eligible for a certain period of time.
But if your credit score is above 740 and you’ve got some decent credit history to back it up, you should have access to the lowest mortgage rates and a wide array of loan options.
Credit scores in between should still work, though there might be pricing hits associated, which all else being equal, may bump up your interest rate.
Tip: Lenders want to see a minimum of 3 active credit tradelines with two-year history on each to assess your creditworthiness.
As far as job history goes, it’s important to show the mortgage underwriteryou’ve had (and still have!) a steady job, typically for two years or longer.
This essentially proves that you will continue to receive regular income to make those costly mortgage payments each month for the next 30 years.
If you just graduated and have held a job for a mere two months, don’t expect to qualify for a mortgage unless your new position directly correlates with what you studied in school.
For example, if you went to medical school, and now have a job as a doctor, this might be sufficient to qualify for a mortgage.
But if you were an art history student who has been working as a flight attendant for two months, mortgage lenders probably won’t feel comfortable lending to you just yet. Make sense?
When seeking out your mortgage, you’ll also need to consider the mortgage down payment requirements, which vary depending on the type of loan you’re after.
While there are still some zero down mortgages around, namely VA loans and USDA loans, it certainly helps to set aside some assets so you’ve got something to put into your home purchase.
Obviously, the amount of money needed will also vary based on the purchase price of the home. If you want a more expensive house, expect to put more down in order to qualify.
If we’re talking about a mortgage refinance, you’ll need a certain amount of home equity to qualify for the mortgage, as determined by loan-to-value ratioconstraints.
When it comes down it, it’s all pretty much common sense. Do you think you can/should qualify for a mortgage?
Do you have a track record of making on-time payments, carrying large amounts of debt and paying it down, holding a job, and saving money?
Are you ready to make a big commitment? If you were the bank, would you lend you a mortgage…hmm.
I would guess that most prospective homeowners could assess the situation beforehand and determine if they should be granted a mortgage.
But without running the numbers, you won’t know for certain. So be sure to do plenty of calculations and speak with a loan officer or two to see where you stand.
Here’s a general list of what you need to qualify for a mortgage. Keep in mind that qualification requirements vary greatly by lender and loan type.
In some cases, you won’t need all of these things, but it should certainly make life easier to satisfy everything on this list.
If you can’t satisfy these basic requirements, you may want to keep renting, saving, and working on your credit until you can.
Or consider adding a co-signer who is better qualified to apply for a mortgage.
Either way, don’t be discouraged. There are lots of home loan programs and creative options out there to suit all different needs. As noted, one lender may say no while another says YES.
Read more: Tips for first-time homebuyers.
American Mortgage Solutions, Inc.
10602 Timberwood Circle
Louisville, KY 40223
Company NMLS ID #1364