Income Analysis

The documentation in the loan file should support the borrower’s ability to repay the loan by establishing stability of income. Stable employment does not necessarily mean the borrower must have been at the same employer, in the same job, for at least two years. Each borrower’s situation is different. This course will identify several examples of stable employment, methods to document employment and income to meet program guidelines, and the most common calculations for establishing acceptable qualifying income for a borrower. There is a paystub example emphasizing the pertinent sections to review for performing the proper income calculations to qualify a borrower for the loan. The math for the monthly housing expense to income ratio and the total debt-to-income is presented along with an example to apply the concepts. Finally, self-employment income details are explained along with a list of the typical documents needed to establish stability of income.


The course covers the following objectives:

 - Explain stability of income
  - Define the acceptable and unacceptable sources of income
  - Understand the types of documentation used for documenting a borrower's employment history
  - Learn how to calculate the monthly income of a borrower
  - Learn how to calculate the monthly housing expense ratio and the debt-to-income ratio
  - Identify the different types of self-employed borrowers
  - Know the different forms used for analyzing the income of self-employed borrowers


The course covers the following topics:

 - Purposes of the Rule
 - How stable income is considered in the risk analysis
 - Examples of different income types and the methods to establish stability
 - Documentation requirements typically needed for verifying employment history
 - Items to review on a paystub
 - The sections of a verification of employment (VOE)
 - Differences between standard and alternative documentation requirements
 - Various methods to calculate qualifying monthly income
 - Calculating ratios for the monthly housing expense and debt-to-income for borrowers
 - Interest-only mortgage payment calculations
 - Summary of rules for self-employed borrowers and the documents required for the file


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