How do you determine income for a borrower with non-taxed, fixed income for qualification purposes?

How do you determine income for a borrower with non-taxed, fixed income for qualification purposes?

• A. Monthly Income x 100%
• B. Monthly Income x 125%
• C. Monthly Income x 150%
• D. Monthly Income x 110%

Answer: (B)

When income is non-taxed and fixed, you determine qualification by grossing it up to reflect that taxes aren’t deducted. The standard approach is to increase the monthly amount by 25%, i.e., multiply by 1.25. This gives you the qualifying income that more accurately represents the borrower’s purchasing power for loan qualification. For example, if the borrower shows $2,000 per month in non-taxed fixed income, you would use $2,000 × 1.25 = $2,500 for qualification purposes. This 25% increase is a common underwriting practice because non-taxed income isn’t reduced by taxes, so it’s treated as more reliable when assessing ability to repay.

When income is non-taxed and fixed, you determine qualification by grossing it up to reflect that taxes aren’t deducted. The standard approach is to increase the monthly amount by 25%, i.e., multiply by 1.25. This gives you the qualifying income that more accurately represents the borrower’s purchasing power for loan qualification.

For example, if the borrower shows $2,000 per month in non-taxed fixed income, you would use $2,000 × 1.25 = $2,500 for qualification purposes. This 25% increase is a common underwriting practice because non-taxed income isn’t reduced by taxes, so it’s treated as more reliable when assessing ability to repay.