HOW TO DO A MORTGAGE INCOME ANALYSIS
One of the lessons I learned during my underwriting career is that the most likely reason a borrower defaults is due to their DTI ratio (Debt To Income), or stated in plain english you “can’t afford” the payment on your house. This is because the DTI either starts off too excessive or becomes too excessive […]
Freddie Mac Bulletin 2022-18
Freddie Mac Bulletin 2022-18 offers new method of income calculations for 1099 borrowers. The United States is looking at earning income much differently than it did just a decade ago. With industry mavericks like Uber changing the way Americans get around cities, they and other companies led the way into our new Gig Economy. The […]
FHA Mortgagee Letter 2022-09
FHA has recently amended their guidelines to allow more flexibility to calculate income for borrowers whose variable income was affected by the COVID 19 pandemic as announced in mortgagee letter ML 2022-09. FHA guidelines tend to focus on two years averaging of income, many borrowers were affected in the last two years due to COVID. […]
How to complete a liquidity test
When completing income analysis for self employed borrowers there are a few key steps that must be followed. A liquidity test must be performed before your borrower can use self employed income from a K-1 attached to a 1065 or 1120S tax form. How to complete a liquidity test? Follow these steps. Step one Make […]
K-1 Income For Self Employed
Calculating K-1 income for self employed K-1 income for self-employed borrowers is one of the most common questions we receive. We understand—it’s complicated. As mortgage professionals, we aren’t tax experts, but since self-employed individuals make up a significant percentage of potential borrowers, it’s crucial to understand how to calculate K-1 income correctly. Key considerations First, […]
Lykken on Lending – Pre-Qualification Letter
Our managing director Michael Whitbeck was invited on the Lykken on Lending podcast with LenderTool Kit’s Brent Elmer to talk about the importance of Verified Approval Letter versus a Pre-Qualification letter. These two things may sound the same but they are very different and can have severe consequences to any lender’s reputation in the market. […]
IRS Changes for Meals and Entertainment
On December 27, 2020 the IRS announced a two-year exception as part of the Consolidated Appropriations Act that impacts the meals and entertainment deduction rule for businesses. This exception will be reflected on the 2021 and 2022 tax returns. How does this rule affect the way underwriting will look at self-employed borrower’s income? Let’s go […]
Changes to 2021 Tax Returns for Underwriting
This time of the year we all have an important to-do list item…. tax preparation. I try to make sure I turn in my numbers to my CPA by my birthday February. Now that I have a chance to look through the tax returns to complete my own tax preparation, I wanted to report what […]
Fannie & Freddie Drop P/L Requirements
As a person that has worked, trained, and mentored in the mortgage underwriting world for 27 years, I definitely guessed the profit and loss situation wrong! My best guess was at earliest they may remove the P/L after you filed your 2021 returns, but to my surprise the following happened. On February 2, 2022 as […]
Crazy Year To Date Income
When January rolls around we often see encouraging messages, stories, tweets, or other social media posts encouraging us as we cross into the new year. A common word I hear used is “Perspective”. Perspective is an interesting word, Webster’s Dictionary gives it a few different examples to explain it’s meaning. One of the meanings it […]