IncomeXpert supports income “gross-up” based on agency guidelines. This adjustment is used because mortgage qualification is based on gross income, while some income types are non-taxable and reported as net.
Common Non-Taxable Incomes Eligible for Gross-Up
Child Support
Alimony
Social Security Income
Military Housing and Substance
VA Benefits
401K / Pension Income
Or any income that can be documented as non taxable >
Standard Gross-Up Rates by Agency
Agency Gross-Up % Reference
Fannie Mae 25% B3-3.1-01
Freddie Mac 25% 5305.2
FHA 15% 4000.1 II.A.4(P)
VA 25% Handbook Chapter 4, Section 9
USDA 25% HB-1 3555.1, Chapter 9
Special Case: Social Security (SS) Income
IRS Regulations state a maximum of 85% of SS income. This means 15% is always non-taxable and can be grossed up.
Here is the full math example:
Find the Non-Taxable Portion:
SS Income × 15%
Example: $1,000 × 0.15 = $150
Apply Gross-Up Rate:
$150 × 25% = $37.50
Final Income:
$1,000 + $37.50 = $1,037.50
IncomeXpert Shortcut Method
Rather than multiple steps, use:
Formula: SS Income × 3.75% = Gross-Up Amount
Example:
$1,000 × 3.75% = $37.50
Final Income = $1,000 + $37.50 = $1,037.50
IMPORTANT since FHA has a 15% gross up % the “short cut” is changed to 2.25% to achieve the same result
This shortcut mirrors the Fannie/Freddie math example in their guidelines and is built into our tool when you select NO on the “taxed” question for Social Security or Disability.