Section 4: Underwriting Guidelines - esnmc.com

Section : Income SNMC Page | 1 February 22, 2011 Income General Employment and income are essential ingredients to successful home ownership. Qualifying income should be stable, predictable, and likely to continue. The Underwriter must determine that the borrower demonstrates the financial wherewithal to repay the proposed real estate transaction as well as other obligations in addition to having an AUS approval. In determining stable income, underwriters must be able to conclude that the income is likely to continue for the next three years. Declining Income: A two year income stream should be documented and analyzed in each loan file. Both salaried and self employed borrowers should be reviewed for stability of income. Any decline in income must be addressed and the income used to qualify must be justified by the underwriter. Self-employed borrowers: the underwriter must determine if the business can be expected to continue to generate sufficient income for the borrower s needs.

If the borrower’s income is consistent between 2008 & 2009, tax returns for 2010 may not be required. If borrower’s income declined between 2008 & 2009, obtain P&L and 12 months bank statements for

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