Borrower’s Capacity to make mortgage payment is one of the key component reviewed by underwriter while dealing with mortgage application. Borrower’s capacity is analysed and is directly based on his gross monthly income.
Income to be used for qualifying purpose can be from different sources. Majority of the application which are approved are for salaried borrower with fix base income. In few scenarios underwriter may also have to use variable income through employment like bonus, overtime, incentives with adequate history and continuity. Borrower’s pay-stub, W2, direct verification from employer (VOE) are some of the documentation required while qualifying borrower based on his income through employment.
Income from business can also be used for qualifying purpose. For self employed borrower underwriter prefer to analyse business flow through Individual and Business Tax returns. If required Profit and Loss statement for current year can also be documented. W2 and K1 are some of the other document involved in business scenario.
Social Security Benefits, Pension and Retirements, Interest and Dividends, Alimony and Child Support are some of the other type of income considered for qualifying purpose.