Income computation- commissions

[Anonymous]

I'm on commission only pay.

Do you'll know how many years they can use to average income.

For instance if I want them to use 2008, 2009 and 2010 will they allow that?

I had a very good 2008 and 2009 and not as good 2010.

will they take the two years tax returns for 2008 and 2009 and then paystubs on 2010 or will they just want to take

2009 and 2010??

Thanks

[Anonymous]

We are in a situation.    I just got off the phone with a lender and they told me that they can't ask for 2010 until after April 15th.   Now I don't know if that is really true or if it has something to do with FHA or what.  

He said we needed 2008 & 2009 until 4/15/11

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@Anonymous wrote:

I'm on commission only pay.

Do you'll know how many years they can use to average income.

For instance if I want them to use 2008, 2009 and 2010 will they allow that?

I had a very good 2008 and 2009 and not as good 2010.

will they take the two years tax returns for 2008 and 2009 and then paystubs on 2010 or will they just want to take

2009 and 2010??

Thanks

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I wish you luck!!! 

[Anonymous]

That is interesting because I thought they normally ask for a ytd paystub when it is before you have filed your tax returns.

Anyone else have any opinion?

[Anonymous]

I am wondering this, as well.

[Anonymous]

Oh I so hope that's not the case. I'm planning on doing my 2010 taxes asap and then qualify based on 09 and 10 tax returns by February. Having to wait until 4/15 would completely ruin my plans.

[ShanetheMortgageMan]

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@Anonymous wrote:

I'm on commission only pay.

Do you'll know how many years they can use to average income.

For instance if I want them to use 2008, 2009 and 2010 will they allow that?

I had a very good 2008 and 2009 and not as good 2010.

will they take the two years tax returns for 2008 and 2009 and then paystubs on 2010 or will they just want to take

2009 and 2010??

Thanks

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This may come as a surprise, but they may completely throw out 2008's & 2009's, and only use 2010, since your commissioned income has declined this year.  It's called "declining income" and you may be required to write a letter of explanation on why you don't anticipate your commissioned income to further decline in 2011, or if you do, then you may just be flat out denied for instability of income.

Will your 2010 income not qualify you for the home price you want to buy?  What if your income fell further in 2011, would you still think buying that particular home would be a good idea?

[ShanetheMortgageMan]

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@Anonymous wrote:

That is interesting because I thought they normally ask for a ytd paystub when it is before you have filed your tax returns.

Anyone else have any opinion?

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If you are employed, you will always need to provide the most recent paystubs covering 30 days of pay.  You will always need to provide tax returns as well.  If you've filed a tax return, it needs to be provided.

Before April 18th 2011 (usually it's April 15th, but this year that date is Emancipation Day which is a holiday observed in Washington DC, so tax day falls on the next business day) you have the option to use 2008 & 2009's tax returns, or 2009 & 2010's tax returns.

After April 18th 2011 you have the option of using 2009 & 2010 tax returns, or using 2008 & 2009 tax returns and also providing the filed extension on your 2010 taxes.  This isn't a chance to hide 2010's tax return, even if it has been filed.  All loans are checked against the IRS database to make sure the correct tax returns are being reviewed (correct as in the ones that were filed with the IRS).

After October 17th 2011, which is the last day to file on an extension, 2009 & 2010's are mandatory.

You may ask why someone who is not self-employed must provide tax returns.  The answer is because even people who are not self-employed can still claim expenses on their tax returns, and those expenses need to be factored into the income calculation.

If you are self-employed, income is calculated straight from the tax returns.  If you are not self-employed, then your income is calculated by your pay from your employer, and then expenses claimed on the tax return are deducted from that.

[Anonymous]

So, just so I'm clear, before April 18, 2011, I can use 2008 and 2009 tax returns and what do I show them for 2010?...the most recent 30 days pay stub, which in this case if I apply now would be December 31, 2010 as of tomorrow.  In effect, this will give them three years of income figures.  Will they average the three years to calculate an income figure/

How much latitude does the mortgage banker have?

Thanks,

[ShanetheMortgageMan]

cpacfp - you aren't self employed, you work on commissions, your income will be calculated off of paystubs.  Read the 2nd to last response I posted, that information applies specifically to your situation.

[Anonymous]

Thank you so much for the clarification, Shane. I almost had a heart failure thinking I couldn't use the 2010 tax return until after April 15.