Understanding Fannie Mae's Income Calculation Worksheet
Fannie Mae’s Income Calculation Worksheet is a crucial tool for mortgage lenders to determine a borrower’s income eligibility for a mortgage loan. The worksheet helps lenders to accurately calculate a borrower’s income, which is essential in determining their ability to repay the loan. In this article, we will explore five ways to complete Fannie Mae’s Income Calculation Worksheet, providing a step-by-step guide to help mortgage professionals navigate the process.
Method 1: Using the Borrower's Tax Returns
The most common method of completing the Income Calculation Worksheet is by using the borrower’s tax returns. This method involves analyzing the borrower’s tax returns to determine their gross income, which is then used to calculate their qualifying income.
- Step 1: Obtain the borrower’s tax returns for the past two years.
- Step 2: Calculate the borrower’s gross income by adding up their total income from all sources, including wages, salaries, and tips.
- Step 3: Calculate the borrower’s net income by subtracting their total deductions from their gross income.
- Step 4: Calculate the borrower’s qualifying income by multiplying their net income by a percentage that represents their share of the business income.
📝 Note: The percentage used to calculate the borrower's share of business income may vary depending on the type of business and the borrower's role in the business.
Method 2: Using the Borrower's Pay Stub and W-2
Another method of completing the Income Calculation Worksheet is by using the borrower’s pay stub and W-2. This method involves analyzing the borrower’s pay stub and W-2 to determine their gross income, which is then used to calculate their qualifying income.
- Step 1: Obtain the borrower’s pay stub and W-2.
- Step 2: Calculate the borrower’s gross income by adding up their total income from all sources, including wages, salaries, and tips.
- Step 3: Calculate the borrower’s qualifying income by multiplying their gross income by a percentage that represents their share of the business income.
📝 Note: The percentage used to calculate the borrower's share of business income may vary depending on the type of business and the borrower's role in the business.
Method 3: Using the Borrower's Bank Statements
A third method of completing the Income Calculation Worksheet is by using the borrower’s bank statements. This method involves analyzing the borrower’s bank statements to determine their gross income, which is then used to calculate their qualifying income.
- Step 1: Obtain the borrower’s bank statements for the past 12 months.
- Step 2: Calculate the borrower’s gross income by adding up their total deposits from all sources.
- Step 3: Calculate the borrower’s qualifying income by multiplying their gross income by a percentage that represents their share of the business income.
📝 Note: This method may not be suitable for borrowers with complex income sources or multiple businesses.
Method 4: Using the Borrower's Profit and Loss Statement
A fourth method of completing the Income Calculation Worksheet is by using the borrower’s profit and loss statement. This method involves analyzing the borrower’s profit and loss statement to determine their gross income, which is then used to calculate their qualifying income.
- Step 1: Obtain the borrower’s profit and loss statement for the past 12 months.
- Step 2: Calculate the borrower’s gross income by adding up their total revenue from all sources.
- Step 3: Calculate the borrower’s qualifying income by multiplying their gross income by a percentage that represents their share of the business income.
📝 Note: This method may not be suitable for borrowers with complex income sources or multiple businesses.
Method 5: Using the Borrower's Self-Employment Income Worksheet
A fifth method of completing the Income Calculation Worksheet is by using the borrower’s self-employment income worksheet. This method involves analyzing the borrower’s self-employment income worksheet to determine their gross income, which is then used to calculate their qualifying income.
- Step 1: Obtain the borrower’s self-employment income worksheet for the past 12 months.
- Step 2: Calculate the borrower’s gross income by adding up their total self-employment income from all sources.
- Step 3: Calculate the borrower’s qualifying income by multiplying their gross income by a percentage that represents their share of the business income.
📝 Note: This method may not be suitable for borrowers with complex income sources or multiple businesses.
In conclusion, completing Fannie Mae’s Income Calculation Worksheet requires careful analysis of the borrower’s income sources and calculation of their qualifying income. By following the five methods outlined in this article, mortgage professionals can accurately complete the worksheet and determine a borrower’s income eligibility for a mortgage loan.
What is Fannie Mae’s Income Calculation Worksheet?
+Fannie Mae’s Income Calculation Worksheet is a tool used by mortgage lenders to determine a borrower’s income eligibility for a mortgage loan.
What are the five methods of completing Fannie Mae’s Income Calculation Worksheet?
+The five methods are: using the borrower’s tax returns, using the borrower’s pay stub and W-2, using the borrower’s bank statements, using the borrower’s profit and loss statement, and using the borrower’s self-employment income worksheet.
What is the importance of completing Fannie Mae’s Income Calculation Worksheet accurately?
+Completing the worksheet accurately is crucial in determining a borrower’s income eligibility for a mortgage loan, which affects their ability to repay the loan.
