When my dog Kevin was issuing pre-approvals based on Desktop Underwriting (DU) findings only, one of his biggest mistakes was not verifying “Income Continuance.”
Lenders cannot use Child Support, Alimony, Disability, or Retirement income unless they have proof that it will continue for a minimum of three years after close of escrow.
For example, if a woman receives child support that ends when her kids turn 18, we cannot use that income if her kids are aged 16 and 17; her child support will not last three years.
Likewise, disability income needs to be permanent or we require a doctor’s letter indicating disability (and related income) will continue for three years or more.
We also need to prove that retirement income will come in regular distributions that will last for three years or more (some borrowers prefer to just withdraw funds on an “as needed” basis but that will not work for qualifying purposes; we need a set distribution schedule).
As a related topic, employment verifications do not need to guarantee continued employment for three years, but they cannot indicate a pending retirement less than three years from now. If they do, we cannot use the income from that employer.
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