RC_LP_U_200.2 Income Review in Residential Underwriting

A borrower's capacity to repay a mortgage loan is primarily measured by the applicant's employment and income. Proper calculation of qualifying income is key to arriving at an accurate set of qualifying ratios. Therefore, it is critical that an underwriter evaluates income and income sources in the appropriate manner, following income guidelines that are acceptable to the final loan investor.

In Income Review in Residential Underwriting, stable, secondary, and seasonal income from employment are discussed, along with variable sources of income derived from overtime, bonus, and commissions. The course also provides a basic overview of the more advanced underwriting income techniques used to analyze self-employment income. Income from sources other than employment, such as child support, alimony, pensions, and interest income, are also examined. Toward the end of the course, techniques for underwriting rental income from the subject property are discussed.

Note that the concepts explained in this course form the foundation for sound underwriting. When a loan is run through an automated underwriting system (AUS) such as Fannie Mae's Desktop Underwriter (DU) or Freddie Mac's Loan Product Advisor (LPA), borrower eligibility and documentation requirements will differ as a result of the risk factors present within each individual transaction.

This is a single-family/residential course.