July 3, 2024 • 20 mins
In this episode of Loan Officer Training, we delve into the intricacies of calculating variable income for borrowers. Understanding and accurately assessing variable income is crucial for ensuring reliable loan approvals. Our expert hosts will guide you through the various types of variable income, such as bonuses, commissions, and overtime, and explain the methods for calculating an average monthly income.
Learn about the documentation needed, common pitfalls to avoid, and best practices to ensure a thorough and precise evaluation. Whether you're new to the mortgage industry or looking to sharpen your skills, this episode provides valuable insights and practical tips to master the calculation of variable income.
Tune in to enhance your proficiency and support your borrowers with confidence!
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Using The Mortgage Calculator proprietary technology, borrowers can instantly price and quote thousands of mortgage loan programs in just a few clicks. The Mortgage Calculator technology also enables borrowers to instantly complete a full loan application and upload documents to our AI powered software to get qualified in just minutes!
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Restream recording Jul 03, 2 (00:00):
So welcome everyone.
My name is Kyle Hiersche.
I'm the COO of the MortgageCalculator joined here by our
sales manager, Jose Gonzalez.
And we are a lender thatspecializes in non QM loans.
And what we do every Tuesday,Wednesday, and Thursday evening
at 7 p.
m.
Eastern on this show is a newloan officer training topic.
Now tonight we're going to betalking about how to calculate
variable income, somethingdefinitely necessary for all
(00:21):
loan officers to know.
So Jose, if you are ready, I'llgo ahead and turn it over to you
and we can get into yourpresentation.
(00:45):
Good evening, everybody.
Thank you for joining us fortonight's training on how to
calculate variable income.
It's a little bit back to thebasics in a way, but with all of
the full doc applications thatwe're getting lately.
As the market is turningregarding interest rates, and we
(01:05):
are getting a lot of those fulldock borrowers that are applying
for our conventional FHA, USDAand VA loans where we're usually
see this now, we do have fulldock borrowers.
Non QM loans as well.
So that would be applicable forthis, but I guess the gist of it
is we're getting a lot more fulldoc loans.
(01:27):
So I want to make sure thatwe're able to properly deal with
properly calculating variableincome.
So what are we referring to whenwe, uh, speak about variable
income?
Well, variable income is incomethat is calculated by an
(01:48):
averaging method.
Okay.
and can vary depending on thesituation.
Usually variable income, we, perthe different guidelines have to
average it over the past twoyears.
Now, the only exceptions to thiswould be, for example, if you
(02:10):
received an automatedunderwriting approval for a one
year option, in which case youmay not be asked to provide the
two years variable income.
But you may be asked, dependingon the type of variable income
that we're talking about, youmay be asked for some type of
(02:30):
letter documenting that thatincome is going to continue
because that is one of thecategories that we're going to
cover in a minute.
So just note that, or in thescenario where you're doing a
non QM loan and you've chosenthe one year full doc option,
You may still be asked in somecases by underwriting to
(02:53):
document the continuity of thatincome, not provide any other
years income, which is going tochange your average because
you're only using one year'sincome.
So you don't have to averageanything, but the continuity is
something to consider as youwill see shortly in our
presentation.
Now, what, what are the types ofvariable income?
(03:17):
Well, Listed here are the mostcommon categories of variable
income.
You're talking about commission,right?
Like sales commission.
You're talking about tips incomein the service industry, our
bartenders, our, our servers atrestaurants, banquet hall
(03:39):
workers, all of those workersget, tips income bonuses.
Overtime, bonus and overtime andcommission are probably the
three most common, categories ofvariable income.
Automobile allowance, capitalgains income, interest income,
(03:59):
and dividends income.
And some of those may be, have adefined, expiration date.
Others may have an undefinedexpiration date, and that's
what's going to determine whatdocumentation would be
appropriate to, document theincome.
(04:21):
So with that, we jump rightinto, the challenges of variable
income, right?
Our challenges of variableincome are the first one.
Now, if you know aboutcommissions, over time or
bonuses or any other type ofvariable income.
(04:42):
If the income is trendingdownwards, that's a big problem.
now if the income is trendingdownwards and you are having to
average the two years amount,what's going to happen is you're
not going to be able to use thehigher average of let's say 2022
or the higher income of 2022.
(05:03):
If 2023 is income is lower forcommissions, For example, you
would have to use only the lower2023 amount.
You cannot average a higherprior income amount with a lower
current income amount, whenwe're talking about commission
income or any other type ofvariable income.
(05:24):
So if the income is trendingdownward, that's definitely a
challenge.
And depending on.
How much of a percentagedownward it went?
You may not be able to use thatincome at all.
Underwriting may say, you know,that's declined too much.
We really aren't sure if that'seven going to be around next
year.
(05:44):
So we're not going to use it.
And that's, that's their call todo it.
The second challenge that youheard me mention a couple of
times already is continuity ofthe income.
That's another big challenge.
You know, not only that theincome may decrease, But then
(06:04):
the income may be eliminated,right?
Because for continuity ofincome, you have to doc, your
documentation must support ahistory of receipt of that
income and the amount,frequency, and duration of the
income.
And if the needed history is notprovided or the amounts do not
(06:25):
support the value, then theincome also May not be used,
right?
If you can't document that, it'sgoing to continue.
Now, continuity of income isdefined into two categories,
right?
The first category is thecategory where the income does
(06:48):
not have an expiration date.
Right?
So for income that doesn't havean expiration date, you need to
document the last 24 months.
Of history of receipt of thatincome, but guidelines do state
12 to 24 months of receipt ofthe income may be considered on
(07:10):
a case by case basis.
And usually that's going todepend on a written VOE of the
employer marking the box isthis, income to be expected to
continue when they're talkingabout overtime, when they're
talking about, about bonuses,stuff like that, that is, is
this.
It's expected to continue andthe employer can write yes or no
(07:32):
and the employer can actuallyelaborate.
I think it's in box number 20.
Of the written VOE, the part forthe remarks, where they could
say yes, and then they couldsay, yeah, they're gonna,
they're definitely gonna gettheir bonus next year, or
they're, they're still gonna getovertime, or they're still gonna
be getting commissions, all ofthose types of statements on a
written VOE is what's gonnaallow you to get that 12, but
(07:53):
less than 24 month time periodof receipt of variable income
without a defined expirationdate to be accepted, and what,
and again, the categories we'retalking about here, Of variable
income without a definedexpiration date would be capital
gains.
You know, you get, you makecapital gains on the sale of an
(08:15):
asset.
So the real estate, so stocks,so bonds, that's all going to
give you capital gains.
And remember, unless you're aprofessional home flipper,
that's what you do.
If you just happen to sell ahome this year, you're not going
to get capital gains added toyour income for analysis
(08:35):
purposes from just one capitalgains transaction.
It has to be a recurring thing.
And then bonus overtime andcommissions are other, no
defined expiration dates.
Variable income that is going tobe a challenge to be able to,
determine the amount.
(08:57):
And then the other category ofvariable income, is those with a
defined expiration date.
Now, no defined expiration date,you got to document 24 months,
the last 24 months that'salready been paid, right?
Defined expiration date, notonly do you have to define.
(09:21):
What's already been earned, butyou have to be able to document
that it's going to continue fora minimum of three more years
because maybe it's a depletingasset, for example, right?
Like a pension plan or royaltiesor whatever it may be.
So again, I got commoncategories of variable income
(09:43):
without an expiration with adefined, excuse me, variable
income with a definedexpiration.
And it would be.
a note receivable, right?
You issued a promissory note forsomebody to pay you back.
That note has a certain paymentamount and it has a defined
term.
Once the term of the note ends,you don't make those, you don't
(10:06):
receive those interest paymentsanymore.
So obviously, you know, youwould have to provide a copy of
the note, but I'm going to getinto that in the next slides.
These are the ones that have adefined expiration date.
Notes receivable, retirementdistributions, like from a
pension plan, especially, orsocial security, or royalty
(10:28):
payments, right?
Royalty payments.
You sold a business to somebodyand they're paying you monthly
royalties for X amount of timeand those royalty payments will
continue for X amount of time.
So again, that's another exampleof items with a defined
expiration date.
(10:49):
So, these are our challenges.
So, as usual, when we havechallenges, I like to provide
the solutions.
So, first, we're going to havethe solutions for documenting
variable income with no Definedexpiration date.
Again, we're talking aboutbonuses, commissions, overtime,
(11:13):
to name the, the popularcategories there, and notes
receivable, royalty income.
We also spoke about those andtips income.
So the, the best way, oh, and,and what we have to determine is
continuity.
If it doesn't have a definedexpiration date, we have to
determine continuity of theincome.
(11:35):
And that the income trend ismaintaining, right?
Those are the challenges,continuity and maintaining the
trend.
And the best way to, verify anddocument variable income without
a defined expiration date wouldbe a written verification of
(11:56):
employment.
When we're talking aboutbonuses, commissions, or
overtime, for example, which arethe most common categories.
We always state when you getthat or, or, or nurses, you
know, nurses is in variableincome.
It is one of those weird paystubs with 10 different pay
categories.
So whenever we get these moredifficult income scenarios like
(12:18):
that, or a scenario where wehave variable income, always we
should, uh, as soon as possiblebe sending out a written
verification of employment tothe employer or, retrieving it
from the work number.
If we determine that theemployer participates in the
work number, So that then youcan get a breakdown in writing
(12:38):
of the base income plus thevariable income, be it
commissions, overtimes, bonuses,whatever it may be.
So pay stubs and W 2s or taxreturns are also going to assist
in this.
But, you know, The pay stubsonly really if you have like the
(13:01):
end of 2022 and the end of 2023,where you can get the exact
amount to average it out andthen reconcile it to the W2s to
make sure that those year endfigures total income also match
what's on the W2s and then go tothe tax returns if needed.
But the two year writtenverification of employment will
(13:22):
only work.
Always be the best.
Cause it's going to give you allthat breakdown signed off on by
the employer.
And usually if you look at yourfindings, if it's an automated
underwriting loan, it's alwaysgoing to tell you a written VOE
or paystubs and W 2s.
So, The other items that are notwithout a defined expiration
(13:45):
dates like notes receivableincome, interest income, or
royalty income, or restrictedstock income, those can all be
documented with the legaldocument that pertains to the
income.
So, for the interest income,you're going to have a note,
right?
For the royalty income, you'regoing to have a sales contract.
(14:11):
Restricted stock income isusually a one time event.
So you're just going to have toget a breakdown of the
transaction, on the, you know,whatever was the capital gains
or the value of the restrictedstock income.
There should be some documentfor that.
Now TIPS income, It may be alittle bit more challenging.
(14:33):
So for tips income, really theonly way to document that income
is just strictly with the taxreturn because that's going to
be their total income.
So then for that, you're justgoing to have to determine
continuity of the tip income.
You're going to have the taxreturn.
That's the income they reported.
There's no way to increase thatover what's in the tax return.
(14:55):
And then for tips income, whatyou have to determine at that
point is continuity of theincome.
What did they report in 2022 intotal income, which is going to
include tips.
What did they report in 2023 intotal income, which is also
going to include tips on the taxreturn.
(15:16):
No W 2s alone wouldn't sufficebecause W 2s typically do not
always break down the tipsincome.
Sometimes it may only break downa portion of the tips income.
You know, but not all of it.
And sometimes they don't reportany tips income on the W 2.
(15:36):
Just a straight base pay thatthey gave the employee and
everything else is up to theemployee to report.
So definitely we would need taxreturns.
So now recall here, theimportant point is These are
solutions for documentingvariable, variable income for an
income that does not have adefined expiration date.
(15:58):
So we're always going to look atthe prior two years to determine
averaging, and then we'll haveto determine if the income is
going to continue.
Now we're looking at pay stubsthat have OT right now and all
that kind of good stuff.
That's great.
Maybe they'll ask the employerjust to check off on the box.
Is this going to continue?
Yes.
And if we don't have any kind ofa declining trend, we're okay.
(16:23):
And our last, slide here issolutions for documenting
continuity of variable incomewith a defined expiration date,
as opposed to no defined.
expiration date.
Now again, items with a definedexpiration date.
We're talking about pensionplans, IRAs, the royalty income,
(16:49):
restricted stock income, again,on some of those.
So again, at that point, you'regoing to provide the document.
In one side, we're justdocumenting the income from the
document.
And then on the other side, nowwe're documenting the
continuity.
Of the income to make sure thatit's at least three years beyond
(17:11):
the date of the closing becausewe have to document at least
Three years of continuance ofthat income.
So again, we're looking at ira401k Royalty and any other
documentation from pension plansand other, social security is,
the only one that you're notgoing to have to show continuity
(17:33):
because that's backed by thefull, faith, interest of the
United States government, butany of these other types of,
retirement income, stuff likethat, you're definitely going to
have to get the, whateverdocumentation, the plan
provider.
can provide showing that it isgoing to continue for at least
(17:54):
three years or else you're notgoing to be able to use the
income.
So I hope this helps, with,figuring out how to calculate
variable income.
A lot of this information youcan find in the Fannie Mae,
Freddie Mac, FHA, VA, and USDAselling guides, for guidance.
(18:20):
All right.
Perfect.
Let's go ahead and see if thereare any questions here.
Okay.
So Natalie has a question here.
So 24 month bank statementsalways needed is the question.
Well, that really depends onwhat you're trying to determine,
right?
This is not a bank statementloan.
(18:41):
So if you're trying to showcontinuity of some certain type
of income, And you cannotprovide, the actual documents,
definitely providing bankstatements, showing the receipt
of that income will, will, willhelp.
Now, whether you need 24 monthsor not, depends on if you have,
(19:03):
if you're trying to documentunder a one year income plan or
two year income, depending onyour findings, if you get a one
year findings or two yearfindings, if it's a one year
findings, you could get by with12 months.
And just a letter from a taxpreparer or employer that that
type of income is going tocontinue in the future.
(19:27):
All right.
That is the only question I see.
So I guess we'll go ahead andwrap it up then.
Remember, we do this everyTuesday, Wednesday, and Thursday
evening at 7 p.
m.
Eastern, but tomorrow isTuesday.
July 4th, so we will not see youtomorrow, but we will be back
next week with some new topics.
Thank you everybody for tuningin and we'll see you next
Tuesday at 7 p.
m Eastern for the next episodeof the Loan Officer Training
(19:49):
Series with the Morgan.
So welcome everyone.
My name is Kyle Hiersche.
I'm the COO of the MortgageCalculator joined here by our
sales manager, Jose Gonzalez.
And we are a lender thatspecializes in non QM loans.
And what we do every Tuesday,Wednesday, and Thursday evening
at 7 p.
m.
Eastern on this show is a newloan officer training topic.
Now tonight we're going to betalking about how to calculate
variable income, somethingdefinitely necessary for all
(00:21):
loan officers to know.
So Jose, if you are ready, I'llgo ahead and turn it over to you
and we can get into yourpresentation.
(00:45):
Good evening, everybody.
Thank you for joining us fortonight's training on how to
calculate variable income.
It's a little bit back to thebasics in a way, but with all of
the full doc applications thatwe're getting lately.
As the market is turningregarding interest rates, and we
(01:05):
are getting a lot of those fulldock borrowers that are applying
for our conventional FHA, USDAand VA loans where we're usually
see this now, we do have fulldock borrowers.
Non QM loans as well.
So that would be applicable forthis, but I guess the gist of it
is we're getting a lot more fulldoc loans.
(01:27):
So I want to make sure thatwe're able to properly deal with
properly calculating variableincome.
So what are we referring to whenwe, uh, speak about variable
income?
Well, variable income is incomethat is calculated by an
(01:48):
averaging method.
Okay.
and can vary depending on thesituation.
Usually variable income, we, perthe different guidelines have to
average it over the past twoyears.
Now, the only exceptions to thiswould be, for example, if you
(02:10):
received an automatedunderwriting approval for a one
year option, in which case youmay not be asked to provide the
two years variable income.
But you may be asked, dependingon the type of variable income
that we're talking about, youmay be asked for some type of
(02:30):
letter documenting that thatincome is going to continue
because that is one of thecategories that we're going to
cover in a minute.
So just note that, or in thescenario where you're doing a
non QM loan and you've chosenthe one year full doc option,
You may still be asked in somecases by underwriting to
(02:53):
document the continuity of thatincome, not provide any other
years income, which is going tochange your average because
you're only using one year'sincome.
So you don't have to averageanything, but the continuity is
something to consider as youwill see shortly in our
presentation.
Now, what, what are the types ofvariable income?
(03:17):
Well, Listed here are the mostcommon categories of variable
income.
You're talking about commission,right?
Like sales commission.
You're talking about tips incomein the service industry, our
bartenders, our, our servers atrestaurants, banquet hall
(03:39):
workers, all of those workersget, tips income bonuses.
Overtime, bonus and overtime andcommission are probably the
three most common, categories ofvariable income.
Automobile allowance, capitalgains income, interest income,
(03:59):
and dividends income.
And some of those may be, have adefined, expiration date.
Others may have an undefinedexpiration date, and that's
what's going to determine whatdocumentation would be
appropriate to, document theincome.
(04:21):
So with that, we jump rightinto, the challenges of variable
income, right?
Our challenges of variableincome are the first one.
Now, if you know aboutcommissions, over time or
bonuses or any other type ofvariable income.
(04:42):
If the income is trendingdownwards, that's a big problem.
now if the income is trendingdownwards and you are having to
average the two years amount,what's going to happen is you're
not going to be able to use thehigher average of let's say 2022
or the higher income of 2022.
(05:03):
If 2023 is income is lower forcommissions, For example, you
would have to use only the lower2023 amount.
You cannot average a higherprior income amount with a lower
current income amount, whenwe're talking about commission
income or any other type ofvariable income.
(05:24):
So if the income is trendingdownward, that's definitely a
challenge.
And depending on.
How much of a percentagedownward it went?
You may not be able to use thatincome at all.
Underwriting may say, you know,that's declined too much.
We really aren't sure if that'seven going to be around next
year.
(05:44):
So we're not going to use it.
And that's, that's their call todo it.
The second challenge that youheard me mention a couple of
times already is continuity ofthe income.
That's another big challenge.
You know, not only that theincome may decrease, But then
(06:04):
the income may be eliminated,right?
Because for continuity ofincome, you have to doc, your
documentation must support ahistory of receipt of that
income and the amount,frequency, and duration of the
income.
And if the needed history is notprovided or the amounts do not
(06:25):
support the value, then theincome also May not be used,
right?
If you can't document that, it'sgoing to continue.
Now, continuity of income isdefined into two categories,
right?
The first category is thecategory where the income does
(06:48):
not have an expiration date.
Right?
So for income that doesn't havean expiration date, you need to
document the last 24 months.
Of history of receipt of thatincome, but guidelines do state
12 to 24 months of receipt ofthe income may be considered on
(07:10):
a case by case basis.
And usually that's going todepend on a written VOE of the
employer marking the box isthis, income to be expected to
continue when they're talkingabout overtime, when they're
talking about, about bonuses,stuff like that, that is, is
this.
It's expected to continue andthe employer can write yes or no
(07:32):
and the employer can actuallyelaborate.
I think it's in box number 20.
Of the written VOE, the part forthe remarks, where they could
say yes, and then they couldsay, yeah, they're gonna,
they're definitely gonna gettheir bonus next year, or
they're, they're still gonna getovertime, or they're still gonna
be getting commissions, all ofthose types of statements on a
written VOE is what's gonnaallow you to get that 12, but
(07:53):
less than 24 month time periodof receipt of variable income
without a defined expirationdate to be accepted, and what,
and again, the categories we'retalking about here, Of variable
income without a definedexpiration date would be capital
gains.
You know, you get, you makecapital gains on the sale of an
(08:15):
asset.
So the real estate, so stocks,so bonds, that's all going to
give you capital gains.
And remember, unless you're aprofessional home flipper,
that's what you do.
If you just happen to sell ahome this year, you're not going
to get capital gains added toyour income for analysis
(08:35):
purposes from just one capitalgains transaction.
It has to be a recurring thing.
And then bonus overtime andcommissions are other, no
defined expiration dates.
Variable income that is going tobe a challenge to be able to,
determine the amount.
(08:57):
And then the other category ofvariable income, is those with a
defined expiration date.
Now, no defined expiration date,you got to document 24 months,
the last 24 months that'salready been paid, right?
Defined expiration date, notonly do you have to define.
(09:21):
What's already been earned, butyou have to be able to document
that it's going to continue fora minimum of three more years
because maybe it's a depletingasset, for example, right?
Like a pension plan or royaltiesor whatever it may be.
So again, I got commoncategories of variable income
(09:43):
without an expiration with adefined, excuse me, variable
income with a definedexpiration.
And it would be.
a note receivable, right?
You issued a promissory note forsomebody to pay you back.
That note has a certain paymentamount and it has a defined
term.
Once the term of the note ends,you don't make those, you don't
(10:06):
receive those interest paymentsanymore.
So obviously, you know, youwould have to provide a copy of
the note, but I'm going to getinto that in the next slides.
These are the ones that have adefined expiration date.
Notes receivable, retirementdistributions, like from a
pension plan, especially, orsocial security, or royalty
(10:28):
payments, right?
Royalty payments.
You sold a business to somebodyand they're paying you monthly
royalties for X amount of timeand those royalty payments will
continue for X amount of time.
So again, that's another exampleof items with a defined
expiration date.
(10:49):
So, these are our challenges.
So, as usual, when we havechallenges, I like to provide
the solutions.
So, first, we're going to havethe solutions for documenting
variable income with no Definedexpiration date.
Again, we're talking aboutbonuses, commissions, overtime,
(11:13):
to name the, the popularcategories there, and notes
receivable, royalty income.
We also spoke about those andtips income.
So the, the best way, oh, and,and what we have to determine is
continuity.
If it doesn't have a definedexpiration date, we have to
determine continuity of theincome.
(11:35):
And that the income trend ismaintaining, right?
Those are the challenges,continuity and maintaining the
trend.
And the best way to, verify anddocument variable income without
a defined expiration date wouldbe a written verification of
(11:56):
employment.
When we're talking aboutbonuses, commissions, or
overtime, for example, which arethe most common categories.
We always state when you getthat or, or, or nurses, you
know, nurses is in variableincome.
It is one of those weird paystubs with 10 different pay
categories.
So whenever we get these moredifficult income scenarios like
(12:18):
that, or a scenario where wehave variable income, always we
should, uh, as soon as possiblebe sending out a written
verification of employment tothe employer or, retrieving it
from the work number.
If we determine that theemployer participates in the
work number, So that then youcan get a breakdown in writing
(12:38):
of the base income plus thevariable income, be it
commissions, overtimes, bonuses,whatever it may be.
So pay stubs and W 2s or taxreturns are also going to assist
in this.
But, you know, The pay stubsonly really if you have like the
(13:01):
end of 2022 and the end of 2023,where you can get the exact
amount to average it out andthen reconcile it to the W2s to
make sure that those year endfigures total income also match
what's on the W2s and then go tothe tax returns if needed.
But the two year writtenverification of employment will
(13:22):
only work.
Always be the best.
Cause it's going to give you allthat breakdown signed off on by
the employer.
And usually if you look at yourfindings, if it's an automated
underwriting loan, it's alwaysgoing to tell you a written VOE
or paystubs and W 2s.
So, The other items that are notwithout a defined expiration
(13:45):
dates like notes receivableincome, interest income, or
royalty income, or restrictedstock income, those can all be
documented with the legaldocument that pertains to the
income.
So, for the interest income,you're going to have a note,
right?
For the royalty income, you'regoing to have a sales contract.
(14:11):
Restricted stock income isusually a one time event.
So you're just going to have toget a breakdown of the
transaction, on the, you know,whatever was the capital gains
or the value of the restrictedstock income.
There should be some documentfor that.
Now TIPS income, It may be alittle bit more challenging.
(14:33):
So for tips income, really theonly way to document that income
is just strictly with the taxreturn because that's going to
be their total income.
So then for that, you're justgoing to have to determine
continuity of the tip income.
You're going to have the taxreturn.
That's the income they reported.
There's no way to increase thatover what's in the tax return.
(14:55):
And then for tips income, whatyou have to determine at that
point is continuity of theincome.
What did they report in 2022 intotal income, which is going to
include tips.
What did they report in 2023 intotal income, which is also
going to include tips on the taxreturn.
(15:16):
No W 2s alone wouldn't sufficebecause W 2s typically do not
always break down the tipsincome.
Sometimes it may only break downa portion of the tips income.
You know, but not all of it.
And sometimes they don't reportany tips income on the W 2.
(15:36):
Just a straight base pay thatthey gave the employee and
everything else is up to theemployee to report.
So definitely we would need taxreturns.
So now recall here, theimportant point is These are
solutions for documentingvariable, variable income for an
income that does not have adefined expiration date.
(15:58):
So we're always going to look atthe prior two years to determine
averaging, and then we'll haveto determine if the income is
going to continue.
Now we're looking at pay stubsthat have OT right now and all
that kind of good stuff.
That's great.
Maybe they'll ask the employerjust to check off on the box.
Is this going to continue?
Yes.
And if we don't have any kind ofa declining trend, we're okay.
(16:23):
And our last, slide here issolutions for documenting
continuity of variable incomewith a defined expiration date,
as opposed to no defined.
expiration date.
Now again, items with a definedexpiration date.
We're talking about pensionplans, IRAs, the royalty income,
(16:49):
restricted stock income, again,on some of those.
So again, at that point, you'regoing to provide the document.
In one side, we're justdocumenting the income from the
document.
And then on the other side, nowwe're documenting the
continuity.
Of the income to make sure thatit's at least three years beyond
(17:11):
the date of the closing becausewe have to document at least
Three years of continuance ofthat income.
So again, we're looking at ira401k Royalty and any other
documentation from pension plansand other, social security is,
the only one that you're notgoing to have to show continuity
(17:33):
because that's backed by thefull, faith, interest of the
United States government, butany of these other types of,
retirement income, stuff likethat, you're definitely going to
have to get the, whateverdocumentation, the plan
provider.
can provide showing that it isgoing to continue for at least
(17:54):
three years or else you're notgoing to be able to use the
income.
So I hope this helps, with,figuring out how to calculate
variable income.
A lot of this information youcan find in the Fannie Mae,
Freddie Mac, FHA, VA, and USDAselling guides, for guidance.
(18:20):
All right.
Perfect.
Let's go ahead and see if thereare any questions here.
Okay.
So Natalie has a question here.
So 24 month bank statementsalways needed is the question.
Well, that really depends onwhat you're trying to determine,
right?
This is not a bank statementloan.
(18:41):
So if you're trying to showcontinuity of some certain type
of income, And you cannotprovide, the actual documents,
definitely providing bankstatements, showing the receipt
of that income will, will, willhelp.
Now, whether you need 24 monthsor not, depends on if you have,
(19:03):
if you're trying to documentunder a one year income plan or
two year income, depending onyour findings, if you get a one
year findings or two yearfindings, if it's a one year
findings, you could get by with12 months.
And just a letter from a taxpreparer or employer that that
type of income is going tocontinue in the future.
(19:27):
All right.
That is the only question I see.
So I guess we'll go ahead andwrap it up then.
Remember, we do this everyTuesday, Wednesday, and Thursday
evening at 7 p.
m.
Eastern, but tomorrow isTuesday.
July 4th, so we will not see youtomorrow, but we will be back
next week with some new topics.
Thank you everybody for tuningin and we'll see you next
Tuesday at 7 p.
m Eastern for the next episodeof the Loan Officer Training
(19:49):
Series with the Morgan.
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