When President Trump signed the new tax law into effect for the 2018 tax year, there were some changes that help borrowers qualify for a mortgage or a larger loan amount than they previously qualified for.
One of the biggest changes that borrowers will notice in this year’s tax return is that the standard deduction is almost double for most people.
For years unreimbursed business expenses (URBE) were required to be subtracted from the borrower’s income by the underwriter. This rule was applied to all loan types for borrowers with 25% or more commissioned income, or for any borrower claiming URBE. When this rule was applied to these borrowers, it would increase the risk of a borrower and could decline the loan due to the borrower having a high debt-to-income (DTI) ratio. Some borrowers would write off as much as $3000 in URBE each month, which would result in a deduction of $3000 per month to their income causing the borrower to get declined.
When the government doubled the standard deduction, one the of the “trade-offs” was removing the ability for an employee to right off unreimbursed expenses. Due to this termination to the tax policy, the government agency who regulates mortgages has chosen to remove the requirement to deduct URBE from the borrower’s income.
Because of these changes and that underwriters no longer having to deduct URBE from the borrower’s income, this now allows borrowers to show a higher income; thus, they qualify for a higher loan amount.
When President Trump signed the new tax law into effect for the 2018 tax year, there were some changes that helps borrowers qualify for a mortgage or a larger loan amount than they previously qualified for.
One of the biggest changes that borrowers will notice in this year’s tax return is that the standard deduction is almost double for most people.
For years unreimbursed business expenses (URBE) were required to be subtracted from the borrower’s income by the underwriter. This rule was applied to all loan types for borrowers with 25% or more commissioned income, or for any borrower claiming URBE. When this rule was applied to these borrowers, it would increase the risk of a borrower and could decline the loan due to the borrower having a high debt-to-income (DTI) ratio. Some borrowers would write off as much as $3000 in URBE each month, which would result in a deduction of $3000 per month to their income causing the borrower to get declined.
When the government doubled the standard deduction, one the of the “trade-offs” was removing the ability for an employee to right off unreimbursed expenses. Due to this termination to the tax policy, the government agency who regulates mortgages has chosen to remove the requirement to deduct URBE from the borrower’s income.
Because of these changes and that underwriters no longer having to deduct URBE from the borrower’s income, this now allows borrowers to show a higher income; thus, they qualify for a higher loan amount.
To find out more information give Team Rebecca a call at 717-609-4044 or go to our website: www.RebeccaFoote.com