Qualifying Income: Identify the Type Before You Calculate It
The LO's job is not to copy the borrower's gross pay. Determine the income type, history, trend, continuance and documentation method, then use the amount the program/AUS permits.
Income Type Map
| Income type | What to ask | What can go wrong |
|---|---|---|
| Salary | Annual salary, start date, raises/job changes | Using offer/raise not yet effective or unsupported. |
| Hourly | Rate, scheduled hours, variable hours, history | Assuming 40 hours when actual hours vary. |
| OT / bonus / commission | History, frequency, trend, likelihood of continuance | Using a recent spike or declining income without analysis. |
| Self-employment | Ownership %, business type, years, returns/YTD | Using gross receipts instead of qualifying income analysis. |
| Rental | Lease, tax-return history, REO PITIA, disposition | Using 100% of rent or ignoring the property expense. |
| Pension / Social Security | Source, amount, continuance, taxability | Grossing up when not permitted or lacking continuance evidence. |
Assets Are More Than the Down Payment
Assets can determine cash-to-close, reserves, compensating factors and whether the file survives a change in costs. The LO must know which funds are eligible, accessible and documented—not simply the account balance.
Example: Borrower has $35,000 in the bank and needs $28,000 to close. That does not automatically mean $7,000 reserves. First subtract non-usable funds, pending obligations and verify whether reserve definitions permit the remaining asset type.