Employment-Related Assets as Qualifying Income
The following table provides the requirements for employment-related assets that may be used as qualifying income.
|Assets used for the calculation of the monthly income stream must be owned individually by the borrower, or the co-owner of the assets must be a co-borrower of the mortgage loan.
The documentation must be in compliance with the Allowable Age of Credit Documents policy (see B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, for additional information).
|Assets must be liquid and available to the borrower and must be sourced as one of the following:
|If a penalty would apply to a distribution of funds from the account made at the time of calculation, then the amount of such penalty applicable to a complete distribution from the account (after costs for the transaction) must be subtracted to determine the income stream from these assets.|
|A borrower must only be considered to have unrestricted access to a 401(k) or IRA, SEP, Keogh retirement account if the borrower has, as of the time of calculation, the unqualified and unlimited right to request a distribution of all funds in the account (regardless of any possible tax withholding or applicable penalty applied to such distribution).|
“Net documented assets” are equal to the sum of eligible assets minus:
(a) the amount of the penalty that would apply if the account was completely distributed at the time of calculation; and
(b) the amount of funds used for down payment, closing costs, and required reserves.
|Ineligible assets are non-employment-related assets (for example, stock options, non-vested restricted stock, lawsuits, lottery winnings, sale of real estate, inheritance, and divorce proceeds). Checking and savings accounts are generally not eligible as employment-related assets, unless the source of the balance in a checking or savings account was from an eligible employment-related asset (for example, a severance package or lump sum retirement distribution).|
For complete details, see B3-3.1-09, Other Sources of Income.