Underwriters analyze borrower income to determine how much qualifying income can be used. Qualifying income must be stable and be expected to reasonably continue for 36 months. If IncomeXpert gives an answer of zero this may mean zero qualified income, not zero earned income. IncomeXpert will provide specific advisories on the income analysis report to provide the reason why the income is not qualified. We recommend that you work with your underwriting team to get additional information to possibly use the income.
Here are the common reasons why income is listed as not used / zero:
Employed Income
- If a borrower’s income is declining in the most recent period, the correct income per guidelines is $0.00 (not qualified) until an underwriter can review the information and complete additional analysis. After review, the underwriter may or may not approve the income based on the additional data.
- When income documents are uploaded (our PLUS product) and we did not receive any current income data (IE YTD pay stubs). The only assumption that IncomeXpert can infer from the missing data is the employment is no longer active.
Self-Employed Income
- If a borrower’s income is declining in the most recent period, the correct income per guidelines is $0.00 (not qualified) until an underwriter can review the information and complete additional analysis. After review, the underwriter may or may not approve the income based on the additional data.
- For the K-1 income types (1065 and 1120S). The borrower may have taxable income, but no evidence the income was actually distributed to the borrower. Per the guidelines, evidence of cash distributions, or the business must pass the liquidity test are required. If both of these methods fail, the IncomeXpert will set the income to $0 for underwriting review. NOTE this applies only to Fannie Mae / Freddie Mac loans..
- For 1065 and 1120S. The K-1 indicates “final”. This means the business no longer exists and the income can not be used.