A borrower receives W-2 income from their primary job and also operates a side business as a sole proprietorship that has shown losses for the past two years. When calculating qualifying income, the MLO should:
Correct Answer
B) Subtract the business losses from the W-2 income to determine net qualifying income
Per Fannie Mae guidelines, when a borrower has both W-2 income and self-employment income that shows losses, the losses must be subtracted from other income sources to determine the borrower's actual qualifying income. This reflects the borrower's true financial position.
Why This Is the Correct Answer
Per Fannie Mae guidelines, when a borrower has both W-2 income and self-employment income that shows losses, the losses must be subtracted from other income sources to determine the borrower's actual qualifying income. This reflects the borrower's true financial position.
More Origination Questions
A borrower has a construction-to-permanent loan with a 12-month construction phase. At month 10, construction is only 60% complete due to delays. What is the most likely outcome?
For a construction-to-permanent loan, when must the initial Closing Disclosure be provided for the construction phase?
During a refinance transaction, the appraiser determines that significant unpermitted additions were made to the property. The appraiser wants to discuss this with the MLO before finalizing the report. What should the MLO do?
An appraiser discovers that a property has significant foundation issues that were not disclosed. The appraiser reduces the property value by $25,000 and includes detailed comments about the structural problems. The loan officer is upset because this will kill the deal. Under AIR, the loan officer:
An MLO's compensation structure includes higher payments for certain loan products. When is it acceptable to recommend these higher-compensated products?
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An MLO is processing a refinance for a borrower who currently has an interest-only loan. The new loan will be a fully amortizing loan with a higher monthly payment but lower interest rate. Which factor is MOST important for establishing tangible net benefit?
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