Question about getting approved for a mortgage

[Matthew Palanek]

So in Feb 2014 I will be trying to get pre approved for a mortgage. My issue is, my monthly income is only about half my total income (the other half is split amongst quarterly bonuses. So my question is when getting pre approved, will they just use my w-2 and divide by 12 to find out my monthly income, or does it have to be what I make a month without and of my quarterly bonuses? . Also, the first house I get will be a multifamily house possibly with one or more units rented out already. Will this benefit me in getting a approved easier or will the bank not whether or not there is tenants already in place? Thank you for your help!

[Kevin Romines]

I have been out of lending for 2 years and a lot has changed even in that time, but the income part should still be the same. They will take your wage income for face value, but the bonus income will be counted by adding it all up over the last 2 years and then dividing by 24 months. This will then be added to your base wages.

However if you have a declining bonus income over the last 2 years this could be problematic and in certain circumstances it may not be counted at all. Most will give you credit for the bonus income so long as you have consistently received it over the last 2 years and that its likely to continue.

As far as getting pre-approved via a credit union or a bank, keep in mind that credit unions are regulated much differently than banks and mortgage bankers, so they typically dont have the depth of programs and cant go to as high of an LTV on the purchase as a bank or mortgage banker / broker can.

As far as 4 units being tougher to finance. No they arent really, and the appraisal is critical to all deals, single family to multi-family.

Typically you wont get credit for the rents that are coming in on the new purchase to be counted to offset your debt ratio unless you can prove a 2 year history of managing rentals on your tax return, so you will have to be within debt ratio guidelines without counting that income. I'm referring to FHA, Fannie / Freddie guidelines. Thats not to say that you may find a bank with a portfolio loan with different guidelines, but if you do they typically call for a larger down payment than FHA.

I hope this helps?