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LOAN OFFICER KNOWLEDGE BASE

Income & Asset Knowledge Base

Teach the new LO to identify the income type before trying to calculate it. The question is not 'How much do you make?' but 'What kind of income is this, how stable is it, and how is it documented?'

BACK TO KNOWLEDGE BASE

What You Need to Know

Salary

Start with documented annual salary and convert to monthly when stable and supportable. Verify current employment and applicable history.

Hourly

Hourly rate × qualifying hours must be supported. Variable hours may require averaging rather than assuming 40 hours.

Overtime / bonus / commission

History and trend matter. A recent spike is not automatically stable qualifying income; declining trends may require additional analysis.

Self-employment

Gross business revenue is not qualifying income. Tax returns/business records and program-specific analysis may be required.

Retirement / Social Security / pension

Document the source, amount and expected continuance under applicable guidelines.

Rental income

Lease, tax-return history, appraisal rent schedules and program rules may determine usable rental income and related expenses.

Assets

Funds must be owned/accessible/eligible and documented. Large deposits, transfers, business funds, gifts and borrowed funds may require sourcing.

Reserves

Reserves are funds remaining after closing as defined by the applicable program. Requirements vary by occupancy, units, properties owned and product.

Questions to Ask — and Why

QUESTION TO ASK
WHY YOU ASK IT
WHAT THE ANSWER CHANGES
Is your pay fixed or does it change?
Distinguishes stable salary from variable income.
Determines whether averaging/history analysis is needed.
Have overtime/bonus/commission amounts increased, decreased or stayed stable?
Trend can affect usable income.
A declining trend may reduce or eliminate usable variable income.
Are you self-employed or do you own 25%+ of a business?
Ownership can change the required analysis.
May trigger tax-return/business-income review.
Do you receive rent from any property?
Rental income may offset housing obligations if eligible.
Triggers lease/tax/appraisal documentation and REO analysis.
Are any closing funds coming from a business account?
Business funds can require additional access/impact analysis.
May require business documentation and underwriter review.
Training standard: A student should be able to explain the concept in their own words, identify the borrower question that reveals it, and name the documentation or calculation that supports the answer.