Faramarz Moeen-Ziai SVP of National Sales and Production for San Ramon, California-based Commerce Home Mortgage, says that some applicants think they make more qualifying income than they actually do.
The key word there is "qualifying."
Borrowers might have received a big bonus at the end of the year. They want to count that bonus as part of their regular income. But there's a problem: Lenders have to follow specific rules when it comes to bonuses. They can't count bonus income unless applicants have received that bonus for at least two years. Lenders then take a two-year average of the bonus. That two-year average is the actual dollar amount that lenders will consider when determining applicants' annual income.
"You have to think about your income as an underwriter does," Moeen-Ziai said. "Don't think of it the way the rest of the real world does."