At MortgageDepot, we are always on the lookout for ways to help our clients maximize their borrowing potential. One often-overlooked opportunity lies in the use of auto allowances as additional income. Did you know that conventional loans now allow the full use of auto allowance as additional income? It’s true, and it can make a significant difference in your mortgage application.
Simplified Calculations for Auto Allowance
Both Fannie Mae and Freddie Mac have streamlined the process for incorporating auto allowances into your income calculations. Gone are the days of complicated formulas and confusing calculations. Now, the full amount of your auto allowance, as it appears on your paystub, can be added to your income. This change simplifies the process and can potentially increase your borrowing power.
Important Guidelines to Keep in Mind
While the new guidelines are more straightforward, there are still some important requirements to be aware of:
1. Two-Year History of Receipt: Both Fannie Mae and Freddie Mac require that you have a two-year history of receiving the auto allowance. This ensures that the income is stable and reliable.
2. Freddie Mac’s Additional Requirement: In addition to the two-year history, Freddie Mac also requires that there is a three-year continuance on the Verification of Employment (VOE). This means that your employer must verify that you will continue to receive the auto allowance for at least the next three years. Fannie Mae does not have this additional requirement.
3. Income Only, Not Deductible: It’s important to note that the full amount of the auto allowance can be added as income only. It cannot be deducted from your auto payment. This distinction is crucial for accurately calculating your total income.
How This Benefits You
Incorporating your auto allowance as additional income can have several benefits:
- Increased Borrowing Power: By adding the full amount of your auto allowance to your income, you may qualify for a larger loan amount.
- Simplified Process: The elimination of complicated formulas makes it easier to understand and utilize your auto allowance.
- Flexibility with Lenders: With both Fannie Mae and Freddie Mac adopting these guidelines, you have more options when choosing a lender.
At MortgageDepot, we are committed to helping you navigate the mortgage process with ease. If you have an auto allowance and are considering a conventional loan, our team of experts is here to guide you every step of the way. Contact us today to learn more about how you can leverage your auto allowance to achieve your homeownership dreams.