Determining Gross Income w/ Overtime Pay

[alpo_md]

I've been reading up on the Home Affordable Modification Program Guidelines. I've already contacted my mortgage servicer, answered several questions on income, debt, budget, etc... and then was told they will get back with me in about 3 weeks (this was 2 weeks ago).

Due to an oddball situation, it isn't clear to me how my Gross Income will be calculated. Early last year, my job was reclassified from exempt (not eligible for overtime) to non-exempt (eligible for overtime) and my salary was reduced by 15%. While I have received more than enough overtime to make up for the 15% loss in salary in 2008, it is not guaranteed and could potentially be capped at any time in the future. I would also prefer not to have to work so much overtime to keep up with the mortgage and other expenses.

While it is clear that overtime is to be included in the Monthly Gross Income, I do not have enough overtime history for the mortgage servicer to properly estimate what my future overtime income will be... nor is my overtime guaranteed in the future. And the source for income/asset validation looks to be the Tax Return transcript which doesn't contain true Gross Income and won't differentiate between salary, bonus, overtime, etc.

How would you determine what my Gross Income will be in this scenerio? (yearly values):

2006:
Salary: $74.6K
Bonus: $7K
OT: none
Total: $81.6K
W2 Gross Earnings: $77.6K

2007:
Salary: $78.4K
Bonus: $7K
OT: none
Total: $85.4K
W2 Gross Earnings: $76.9K

2008:
Salary: $69.4K
Bonus: $7.4K
OT: $19.5K
Total: $96.3K
W2 Gross Earnings: $85.8K

2009 (through 1 QTR):
Salary: $17K
Bonus: $5.5K
OT: $6K
Total: $28.5K

My original thought was to just take the avg of 2007 and 2008 ($90.85K)... but if my overtime was totally not included because of a lack of history, then the avg of 2007 and 2008 would drop to $81.1K... This would put me in a much better
position as far as the Modification program is concerned (lower rate over the first 5 years)... And if only my 2008 salary and bonus was taken into consideration then my Gross Income would drop down to $76.8K.

At $90.85K, I would be better of doing a standard refinance outside of the Home Affordable plan. Using the $81.1K or $76.8K values, I would be better off with the Home Affordable Modification program.

Based on zillow values, I'm now at 77.2% LTV. Mortgage rates have recently dropped below my refinance trigger point, but I haven't pulled the trigger because of the possibility of a modification through my current mortgage servicer. My only fear is rates will rise again while I'm waiting and I'll miss a great
opportunity to refinance now.

As for the hardship clause, my wife is pregnant with twins and we expect to have over $10K in medical bills this year... plus extra mouths to feed for the next 18+ years. My wife will most likely go on bedrest in a few months and I will need to cut my overtime to take care of her and our other two kids. I also lost a ton in the stock market and have since depleted what was left of my investment income, took a loan out on my 401-K, and ran up significant debt on credit cards to make ends meet.

So back to my question, what criteria do mortgage providers use to determine Gross Income with overtime pay when there isn't a long enough overtime history and no gurantee of future overtime pay?

Thanks!
alpo_md

[Moe Bedard]

Hi alpo_md,


Welcome to the forum and thank you for joining...........

The program guidelines are still too new and members are still going through the process.........to be able to have an answer for your question.


this is the only information that is given in the guidelines...........

The borrower’s Monthly Gross Income is the amount before any payroll deductions includes wages and salaries, overtime pay, commissions, fees, tips, bonuses, housing allowances, other compensation for personal services, Social Security payment, including Social Security received by adults on behalf of minors or by minors intended for their own support, annuities, insurance polices, retirement funds, pensions, disability or death benefits, unemployment benefits, rental income and other income.

Monthly net income can be used for preliminary screening and qualification. If used, the servicer will need to multiply net income by 1.25 to get to an estimate of Monthly Gross Income.

[alpo_md]

I have read through the guidelines many times... and I also understand they are new and vague... but your reply didn't really address my question.

I was hoping to find a better answer on how my mortgage servicer will determine my overtime based on the loansafe's past modification experience outside of the new program.

alpo_md

[Dan Bailey]

I believe what *** was saying is that, even though it is a short history, it will be averaged in. In other words...THEY will take your paystubs, etc...and do the math-you do not get to determine what they will use and not use.

You can claim a preliminary-but when they get the proof and do the math it will be averaged according to their criteria.

You may have to explain it to the lender (your overtime) and see how they will factor it during the process.

PS: don't count on Zillow..it's proven to be significantly off in determinations.

[Pedro]

my two cents...

i had/have the same situation and what i could do is get a letter from my employer stating my "employment" which also shows my salary.

so your statement to them is "this is my base salary" anything else is a plus and not guaranteed. i feel your pain, OT is great until you need to hide it!