A self-employed borrower provides tax returns showing significant depreciation deductions that reduce their reported income. For PMI qualification purposes, how should this income be calculated?
Correct Answer
B) Add back depreciation to determine qualifying income for PMI
For PMI qualification, self-employed borrowers' income is typically calculated by adding back non-cash deductions like depreciation to their net income, similar to how lenders calculate qualifying income. PMI companies follow similar income calculation methods as they assess the borrower's ability to maintain mortgage payments.
Why This Is the Correct Answer
For PMI qualification, self-employed borrowers' income is typically calculated by adding back non-cash deductions like depreciation to their net income, similar to how lenders calculate qualifying income. PMI companies follow similar income calculation methods as they assess the borrower's ability to maintain mortgage payments.
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