Friday, November 14, 2008

Does All Income Need to Be Listed On the Loan Application?

We are often asked if borrowers have to include all of their income on a loan application. Except in the case of a loan where there are maximum income limits (an affordable housing program, for example), the answer is no. It is always best to submit a loan to underwriting with the least amount of income necessary for the approval because everything that is included on the application must be documented.

A good example of how this would work is if a borrower has $50,000 base income and $30,000 commission income. If the borrower can qualify for the loan with just base income and that's all we enter on the application, then all we have to document is base income. That can be done with just a paystub. However, if we included the commission income on the application, we would also need to provide the last two years of tax returns to prove the stability and continuity of the commission income. That slows down both the documentation collection process and the underwriting process. An easy loan has turned into a more difficult loan.

The same is true for assets. If a borrower only needs to have $5,000 in the bank to get an approval, but has $400,000 in ten different accounts, all we would include on the application is one account that has at least $5,000 in it. Again, it simplifies the loan process and results in faster turn times. Plus, the underwriters love us because we make their lives easier, and our loan submissions go to the top of the pile :-)

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