What deductions are added back to adjusted gross income as far as figuring out the income used to qualify for a mortgage backed by FHA/Fannie/Freddie?
As an example, it seems obvious that the self-employed health insurance deduction (line 29), educator deduction, health savings account should be added back to the AGI in order to arrive at the proper Adjusted Gross Income for mortgage purposes.
What doesn't seem obvious is what you do with elective 401k contributions since these don't appear anywhere in the 1040 form, but do appear in the W-2...and can be seen as clearly reducing Box 1 income, though they don't reduce Social Security wages.
As an illustration, if someone made $100k in Adjusted Gross Income 2009 1040 line 37, but also made $16k in elective 401k contributions (as shown on the W-2), does he/she get to claim $116k as his Adjusted Gross Income for mortgage purposes?
This person always has the option of not making the $16k elective contributions to their 401k in any year should they need to in order to meet their debt obligations, thus that's my reasoning as to why it should be included in the Adjusted Gross Income for mortgage purposes?
Is this something that Underwriters and/or Loan officers automatically do (add back 401k contributions listed on the W-2, though they're not listed on the 1040), or does this need to be requested/pointed out?
