This presentation focuses on the specialized skills required for evaluating and calculating variable income for mortgage borrowers, specifically focusing on fluctuating earnings that are not predetermined or regular.
Key Topics
Variable Income DefinedEarnings that fluctuate, are not predetermined, and do not occur with regular frequency, such as overtime, bonuses, commissions, and part-time pay.
History and Stability RulesA 24-month history is recommended (minimum 12 months), and additional analysis is required if income fluctuates more than 10% year-over-year.
Trend-Based CalculationsQualifying income is determined by trends: stable or increasing income is averaged, while declining but stabilized income requires using the lower current amount.
Risk Assessment (The 4 Cs)Variable income analysis must be balanced against the borrower’s overall credit, capital, and collateral to assess total loan file risk.
Specialized ScenariosThe presentation details specific protocols for 1099 independent contractors, tip income, trust income, and borrowers with recent job changes.
