You may not realize that temporary leave income can be counted toward helping a borrower qualify for their mortgage even if they wonâ€™t be returning to work prior to their loan closing.
If the borrower will be returning to work prior to the first payment, their regular income can be used to qualify for the new mortgage payment, provided it is documented and the date of the borrowerâ€™s return to work can be verified with the employer.
If the borrower will not be returning to work prior to the first payment, the temporary leave income (if any) can be counted toward qualifying, provided it can be documented and is likely to continue until the borrower returns to work and a regular income. In addition, the borrowerâ€™s cash reserves can be used to supplement the income amount in an attempt to help the borrower qualify.
What are â€œCash Reservesâ€? Cash reserves are the amount of funds the borrower will have left after completing the transaction. In other words, once you subtract down payment and cost to close the transaction, the amount of funds left over in a bank account can be considered part of the borrowerâ€™s cash reserves. These cash reserves are divided by the number of payments the borrower is expected to make before returning to work and a regular income. This amount can be added to the temporary income and used to qualify provided the amount does not exceed the borrowerâ€™s regular rate of pay.
The use of cash reserves to supplement temporary income can help many clients who would not normally qualify on their temporary leave income alone, and can help to keep many deals together.
As always, I pride myself on knowing information such as this so I can continue to find solutions to your clientsâ€™ home-financing needs. Please donâ€™t hesitate to call me if I can help with any clients you may have.