Securing a mortgage for your borrower is exciting, but sometimes, you might find your borrower is on the edge of qualification. Imagine helping your borrower who is just a step away from obtaining that coveted mortgage approval when an unexpected opportunity arises, for instance,a new promotion or a potentially higher-paying position!
This scenario opens up a fascinating question: Can you use your future income to tip the scales to get an approval? In this blog post, we’ll delve into the topic of using future income to qualify for a mortgage and explore the factors that determine its feasibility.
Is Your Company Direct Seller to the Agencies?
This first question (and the most impactful to the final answer) Is if your company is a direct seller to the agencies, the use of future income is often limited to direct sellers and might not be an option if your company is a broker. However, if you are selling your loans to the agencies, there might be more flexibility to consider a borrower’s future income.
Keep in mind also, the “hard to find rules” will also say you can not deliver the loan at all until more documentation is obtained showing the borrower DID start the new job or income (first paystubs mainly) ! So this means when you close the loan it will need to stay on your company’s books for MUCH longer than normal. This may not make the loan profitable in some cases.
Finding the guidelines for each agency the key phrase varies with each agency, for example, Employment Offers and Contracts (FNMA B3-3.1-09) or Expected Income (FHA 4000.1)
How Many Days Out After Closing is the new income?
In some cases, you might be able to use your projected income up to 90 days after the mortgage note.This window allows you to factor in potential income changes that might be just around the corner.
New Employer or Promotion at Current Employer?
The source of future income matters and is laid out in the guidelines with each agency. It could stem from a new job with a different employer or a promotion within their current workplace. Details here matter for each agency!
What kind of Transaction
Depending on whether you’re talking purchase or refi, the rules governing the consideration of future income might vary. Familiarizing yourself with these distinctions based on your borrower’s needs ensures you make informed decisions.
Does Your Borrower Have Cash Reserves for Uncertainty?
While your borrower’s future income holds promise, agencies want to mitigate risks. This often means you need to demonstrate cash reserves that can cover their mortgage payments while that new income is starting. Again back to question one, does this make sense for the borrower and your company if the loans have to stay in “limbo” for months on end?
Using future income to secure your borrowers their dream home loan is indeed possible, but it’s a nuanced decision influenced by various factors. While direct sellers and certain lenders might offer flexibility, navigating the intricacies of the mortgage industry’s rules and regulations is vital.