TEXAS-BANK STATEMENT ONLY MORTGAGE LENDERS
Serving All Texas Including Fort Worth Texas, Austin Texas, Dallas Texas, San Antonio Texas, Houston Texas
Are you Texas self-employed or 1099 wage earner and having a hard time getting pre-approved for a Texas mortgage? We know the story. They have a great top line, but after the accountant works their magic there isn’t much adjusted gross income left to by a Texas home. Texas Stated Income Bank Statement Only Mortgage Lenders has the answer…
• the average gross self-employment income earned over the previous 2 years; or
• the average gross self-employment income earned over the previous 1 year. For loans receiving a TOTAL Scorecard Accept/Eligible recommendation refer to the self-employment income requirements in Handbook 4000.1 II.A.4.c.x. For loans that must be manually underwritten, refer to the self-employment income requirements
Commission income refers to income that is paid contingent upon the conducting of a business transaction or the performance of a service.
Commission income may be used as effective income if the Borrower earned the income for at least one year in the same or similar line of work and it is reasonably likely to continue.
For all Commission Income, the Mortgagee must use traditional or alternative employment documentation.
The Mortgagee must calculate effective income for commission by using the lesser of either (i) the average Commission Income earned over the previous two years, or (ii) the length of time Commission Income has been earned if less than two years, or the average Commission Income earned over the previous year.
For self-employed Texas no tax return mortgage applicants , the Mortgagee must obtain complete individual federal income tax returns for the most recent two years, including all schedules. The Texas no tax return mortgage applicants business tax returns for the most recent two years must also be obtained unless the following criteria are met:
• individual federal income tax returns show increasing Self-Employment Income over the past two years;
• funds to close are not coming from business accounts; and
• the mortgage to be insured is not a cash-out refinance.
A year-to-date Profit and Loss (P&L) statement and Balance Sheet must be obtained if more than a calendar quarter has elapsed since the date of the most recent calendar or fiscal year-end tax return was filed by the Borrower. A Balance Sheet is not required for self-employed Borrowers filing Schedule C income. If income used to qualify the Borrower exceeds the 2- year average of tax returns, an audited P&L or signed quarterly tax return must be obtained from the Internal Revenue Service (IRS).
For Self-Employment Income, in lieu of signed individual or business tax returns from the Borrower, the Mortgagee may obtain a signed IRS Form 4506, Request for Copy of Tax Return, IRS Form 4506-T, Request for Transcript of Tax Return, or IRS Form 8821, Tax Information Authorization, and tax transcripts directly from the IRS.
The Mortgagee must analyze the Texas no tax return mortgage applicants tax returns to determine gross Self-Employment Income. Requirements for analyzing self-employment documentation are found in Handbook.
• Federal tax returns;
• The most recent bank statement evidencing receipt of income from the former employer; or
• A copy of the borrower’s pension/retirement letter from the former employer. The Mortgagee must use the current amount of pension income received to calculate effective income.
Residual income may be cited as an acceptable compensating factor for qualifying ratios as described in Handbook 4000.1 II.A.5.d.viii.
Residual income is calculated as total effective income of all occupying borrowers less:
• state income taxes;
• federal income taxes;
• municipal or other income taxes;
• retirement or Social Security;
• total fixed payments (includes total Mortgage Payment and monthly obligations on all debts and liabilities);
• estimated maintenance and utilities;
• job related expenses (e.g., child care); and
• the amount of the gross-up of any non-taxable income.
If available, Mortgagees (Lenders) must use federal and state tax returns from the most recent tax year to document state and local taxes, retirement, Social Security and Medicare. If tax returns are not available, Mortgagee may rely upon current pay stubs.
For estimated maintenance and utilities, multiply the gross living area of the property by the maintenance and utility factor found in the Lenders Handbook – VA Pamphlet 26-7.
To use residual income as a compensating factor, the Mortgagee must count all members of the household of the occupying borrower without regard to the nature of their relationship and without regard to whether they are joining on title or the Note to determine “family size.” The Mortgagee may omit any individuals from “family size” who are fully supported from a source of verified income which is not included in effective income in the mortgage analysis. These individuals must voluntarily provide sufficient documentation to verify their income to qualify for this exception.
From the table provided in Lenders Handbook – VA Pamphlet 26-7, select the applicable mortgage amount, region and household size. If residual income equals or exceeds the corresponding amount on the table, it may be cited as a compensating factor.