IncomeXpert supports the grossing up of income outlined in the guidelines. The amount the income can be grossed up depends on the agency guidelines selected. The reason for this adjustment of income is that mortgage qualification is based on gross income, not net income. Since the ratios used in the mortgage industry (commonly 28/36 for manual underwriting or up to 45% for AUS approved loans) include the consideration of payment of taxes we need to adjust up the incomes that are not taxed to bring the income equal to standard taxed income.
Common incomes that can be grossed up
- Child Support
- Alimony
- Social Security Income
- VA Benefits
- Interest Income
- 401K/Pension Income
- Income that can be documented as non taxable
Guidelines require evidence that the income is non taxable, and will continue to be non taxable.
Guidelines for amounts to gross up
- 25% Fannie Mae B3-3.1-01
- 25% Freddie Mac 5305.2
- 3.75% SS Income from borrowers own SS record/account (retirement/disability/survivor benefits/ Supplemental Security Income) can be added without tax free documentation Reference Fannie Mae B3-3.1-01 & Freddie Mac 5305.2
- 15% FHA 4000.1 II.A.4 (P)
- 25% VA Handbook Chapter 4 Section 9
- 25% USDA HB-1 3555.1 Ch 9