topic Re: Qualifying Income in Mortgage Loans

Qualifying Income

Anonymous — Wed, 07 Mar 2012 05:55:35 GMT

Can you typically count Stock Option Income as qualifying yearly income? I have stock option awards that vest 25%/year over a 4 year period. I have been with my company for over 10 years and have been awarded options every year. So every year in June I have 4 sets of options each vesting 25%. I have netted on average $20K per year each of the last three years from the sale of options. Based on unvested awards and todays stock price I will be able to net about $25K per year on average for the next 4 years. Will an underwriter allow me to use this income in my income calculation? If it helps the stock options income is included on the W2 and taxed as standard income, ie say base salary is $10K, bonus is $1K and sale of options net $10K line one on my W2 would say $21K.

I also receive yearly bonus and can document 7 plus years of receiving this bonus. Will this be included in income?

Re: Qualifying Income

Student_Loans_Kill — Wed, 07 Mar 2012 13:34:09 GMT

yes

Re: Qualifying Income

MBOhio2 — Wed, 07 Mar 2012 14:29:19 GMT

Yes, I have an almost identical employer stock grant program and my stock income was counted... it's definitely part of your annual income.

Re: Qualifying Income

Anonymous — Wed, 07 Mar 2012 17:16:06 GMT

Yes, excluding bonuses.

Re: Qualifying Income

MBOhio2 — Wed, 07 Mar 2012 17:32:02 GMT

My bonuses counted too... I receive semi-annual bonuses every year and while they do fluctuate some, I always get them. I believe my LO just averaged my bonuses from the last 2 years to determine what he would include in my annual income.

Re: Qualifying Income

Anonymous — Mon, 02 Apr 2012 19:20:17 GMT

Does anyone else have experience with this, we are working with several lenders and just received an answer back from the 1st one NVR. They said they can not include stock option income as qualifying income. And can also only include 50% of the last 2 years average bonus income. Even though stock option and bonus income is included on the W2 as regular income this can not be used to qualify.

We provided documentation showing 6+ years of bonus income received, and a letter stating it is likely to continue. For stock option income we provided documentation showing 3+ years of stock option income received, and a letter stating we are likely to continue receiving stock options. We showed proof of a guaranteed 5 years of option income at an amount equal to the three average income reported in 2009 - 2011.

It is strange because the other two lenders "Cole Taylor Mortgage" and "Canandaigua National Bank" seemed to be fine with using option income as qualyfying income. I just called to ask the question and neither loan officer was concerned. We are waiting to hear back later this week or next on what underwriting has to say from both banks. Now I am freaking out.

Re: Qualifying Income

StartingOver10 — Mon, 02 Apr 2012 20:17:42 GMT

Every bank/lender has its own underwriting criteria. It is individual to each lender.

It is perfectly plausable that two banks would allow the type of income you have and another would not allow it. Go with the lender that underwrites their own deals or with a mortgage banker that funds their own deals. That way you know when the approval comes through, it's a done deal because they already have addressed the income issue.

Re: Qualifying Income

Anonymous — Tue, 03 Apr 2012 23:16:30 GMT

Any other info?

Re: Qualifying Income

Walt_K — Tue, 03 Apr 2012 23:21:59 GMT

@Anonymous wrote:
Any other info?

What specific further information are you looking for? It is correct that banks have different guidelines.

Re: Qualifying Income

Anonymous — Wed, 04 Apr 2012 00:15:15 GMT

I was hoping to hear if anyone had some examples of banks to try who may work with me. In case the two I am currently work with decide they can not include the option income.

Re: Qualifying Income

Walt_K — Wed, 04 Apr 2012 00:38:47 GMT

@Anonymous wrote:
I was hoping to hear if anyone had some examples of banks to try who may work with me. In case the two I am currently work with decide they can not include the option income.

I imagine you're fine with the other two lenders. If they've both said there is no issue, it shouldn't be a problem. You could ask them to check specifically with the underwriter to make sure. But I wouldn't assume it will be an issue just because one of the banks had an issue with it.

Sorry can't provide any further insight. Hopefully some others will chime in with specific lenders. I do know from my own experience though that you can't assume an issue with one lender will be an issue with another. I have a condo that I am trying to sell. Some lenders wouldn't approve me for a new house until the condo was sold. Even though my DTI is fine, I don't have a lot of equity in the condo. Other lenders had no issue because of my DTI being low. I had some lenders who counted my bonus income, other lenders that didn't.