Once I wrote a blog titled "Income is not Income". Here is an excellent example.
My client told me how much income she made and this was in general discussion. At one point she commented that in addition to her home she owned a duplex free and clear and the monthly income was approximately $3000 a month. Good. But when we received the income taxes her CPA had taken the mortgage interest that was paid for the residence and counted it against the rental property. My client receives the same amount of money every month but because the interest was now deducted from rental income, the $3000 that I could have used as income now became $300. The client could have shown this $3000 as income to qualify for the loan now she can only use $300 because the CPA was "creative"--probably illegal but creative.
The same client showed me that she will begin to receive $1200 a month Social Security next week. Underwriting rules allow us to gross upthe Social Security income by 25% so I can use $1500 as income.....But there is another rule that I did not know about...You can only gross the income up once the client has done her taxes and the Social Security shows on the income taxes.
My client still qualified after the problem with the rental income but with the $300 reduction in the Social Security income (that we could use) we had to reduce the loan amount by $25,000.
This is not more prudent...this is not conservative lending...this is not being careful..this is simply a horrible understanding that money is money and the cash flow is the same. Another way to shut down the loan machine.
Doug Jones
Mortgage Magic NMLS 286668
My client told me how much income she made and this was in general discussion. At one point she commented that in addition to her home she owned a duplex free and clear and the monthly income was approximately $3000 a month. Good. But when we received the income taxes her CPA had taken the mortgage interest that was paid for the residence and counted it against the rental property. My client receives the same amount of money every month but because the interest was now deducted from rental income, the $3000 that I could have used as income now became $300. The client could have shown this $3000 as income to qualify for the loan now she can only use $300 because the CPA was "creative"--probably illegal but creative.
The same client showed me that she will begin to receive $1200 a month Social Security next week. Underwriting rules allow us to gross upthe Social Security income by 25% so I can use $1500 as income.....But there is another rule that I did not know about...You can only gross the income up once the client has done her taxes and the Social Security shows on the income taxes.
My client still qualified after the problem with the rental income but with the $300 reduction in the Social Security income (that we could use) we had to reduce the loan amount by $25,000.
This is not more prudent...this is not conservative lending...this is not being careful..this is simply a horrible understanding that money is money and the cash flow is the same. Another way to shut down the loan machine.
Doug Jones
Mortgage Magic NMLS 286668
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