A 25% Raise? Get Full Credit for Non-Taxable Income
Most mortgage borrowers know that underwriters look at their debt-to-income ratios when determining how much home they qualify to buy. But most don’t know that Fannie Mae and Freddie Mac give them “extra credit” for any non-taxable income they receive. According to Fannie Mae and Freddie Mac underwriting guidelines,this income can be “grossed up” or increased by 25%. Because it’s not taxable it’s worth more to you–and more to your underwriter. So whether it’s a government pension, interest on muni bonds, Social Security, child support, or whatever–make sure you tell your loan officer that the income is tax-free. And be prepared to supply documents proving it. You might find yourself able to afford more than you thought.
Tags: fannie mae, freddie mac, grossing up non-taxable income, incoe for getting mortgage, underwriting non taxable income
October 17th, 2008 at 1:46 pm
I had no idea about this. I wonder if my neighbor, who is supported by her boyfriend could report that include as non-taxable and get a better deal on a home??!
October 17th, 2008 at 1:48 pm
That is an interesting take! Like all income though she would have to have been receiving it for some time and she has to prove it will be ongoing (some rules specify at least three years). I wonder if her boyfriend is willing to make that commitment in writing? Thanks for making my Friday afternoon
November 13th, 2008 at 2:16 pm
any idea what types of documents would be required to prove the income is non-taxable? I have a military pension that is non-taxable.
June 12th, 2009 at 12:01 pm
I can understand the increase because you now have permanent income. The bigger problem for non-taxable income only people is throwing all that mortgage interest in the garbage disposal. Sure I qualify for a 300000 mortgage, the first 10 years the interest start a $2000.00 and spirals down slowly. average ~$20,000.00 annually.
Maybe if I were younger, wife, kids…