The Dodd-Frank Act includes a provision that a borrower must show an ability-to-repay a mortgage to qualify.
It seems silly that a law had to be passed with this provision in it as you would think someone would not make a loan unless they knew it was going to be paid back.
Nevertheless, this law arose due to the absurdity of the types of loans that were being made during the mortgage crisis. Lenders initially interpreted this rule that the borrower needed to be employed, or have a steady income to qualify; this is one of the reasons why it was tough getting a loan at that time.
For example, there were many people who could pay for a house with cash but could not qualify as they did not have a steady income; as some time has gone by, and confidence is returning to the economy, the lending marketplace and lenders are accepting of different types of compensation to qualify.
Here are some forms of compensation that are acceptable to apply for a loan, other than income from a job:
● Dividend and interest income
● Rental income
● Monthly distributions made from a retirement account
● Social security income
● Disability income
● Foster care income
Some lenders are now allowing an asset depletion calculation, where income is calculated based on the assets you have saved in your accounts. This list is not exhaustive and there
may be other types of income.
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John Rapasky is the President of the Counsel Mortgage Group, LLC. Copyright © 2017 Counsel Mortgage Group®, LLC