Income Verification/Requirements

•	The Guaranteed Rural Housing loan is documented with both Rural Development and FNMA forms. (Rural Development forms are provided in the Forms Section of this manual.)

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All sources of income must be verified using FNMA Form 1005 - "Verification of Employment". Rural Development, as outlined in Rural Development Instruction §1980.351, will typically review the past 24 months to determine both Income Eligibility, as well as compliance with Monthly Housing (29%) and Total Debt (41%) Ratios. Usually, GMG requires verified primary sources of income for a 24-month period to confirm loan approval.

•	Alternate documentation is permitted in place of FNMA Form 1005. Alternate documentation must include: two years W-2’s, 30 days paystubs with year-to-date information, and a Processor’s Certification of Employment.

•	The following should serve as a guideline for handling income-related issues:

•	Full Time - For borrowers whose income is derived from full-time employment, two (2) years of full employment history must be verified on FNMA Form 1005 (Verification of Employment).

o	Borrowers are not required to have 24 months continuous employment with their current employer.

o	Where there has been a change in employers in the last 24 months, the borrower must explain any gap in employment that extends beyond one (1) month.

▪	Two (2) years of tax returns will only be required for:

▪	Self-employed borrowers

▪	Commissioned borrowers

▪	Borrowers employed by a relative or closely-held family business.

▪	Borrowers who are not commissioned, but need to validate their expenses.

•	Part-Time - Part-time or second job income with duration of 12 months may be used.

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Overtime and Bonus Income - Overtime and bonus income can be used to qualify the applicant if the employer verifies that the applicant has received it during the last 12 months and indicates that the overtime or bonus income will in all probability continue. The underwriter must develop an average of the last 12 months overtime and bonus income to determine the amount of income that can be considered in evaluating the borrower's qualifications.

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Self-Employed Income - Two (2) previous years 1040's are required. They must be signed and certified by the applicant. Additionally, a year-to-date Profit & Loss Statement with Balance Sheet, prepared and signed, must be submitted. If the applicant has 25 percent or more ownership interest in any business entity, the applicant must also provide the most recent two (2) years' business tax returns (Corporate, Sub-S Corporate, or Partnership) along with a current Profit and Loss Statement with a Balance Sheet prepared and signed by an accountant.

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Alimony, Child Support, and Separate Maintenance – GMG requires documentation that child support, alimony, or separate maintenance will continue for three (3) years after the date of the mortgage application or it will not be considered as income. The borrower must also provide evidence that the funds have been received for the last 12 months. Acceptable evidence includes deposit slips, canceled checks, court records, or tax returns.

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Retirement Income - Retirement income, i.e., pensions, annuities, 401K distribution, etc., may be verified by letters from the organizations providing the income, copies of the retirement award letters (with photocopies of canceled checks attached), tax returns, or IRS W-2 forms. This evidence must confirm a continuation of this income for a minimum of three (3) years.

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Social Security Income - Acceptable verification includes a photocopy of the Social Security Administration's award letter or copies of the borrower's last 2 bank statements to confirm the regular deposit of the payments. Benefits that have defined expiration dates must have a remaining term of at least three (3) years to be considered as income.

•	Disability Income - Disability income will be considered acceptable income provided it can be documented by furnishing a recent copy of respective letter of benefits or allotment setting forth the terms of the income. The benefits must be on-going for a minimum of three (3) years.

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Unemployment And Public Assistance Benefits – Unemployment And Public Assistance benefits will be considered as income if they are properly documented by letters or exhibits by the paying agency. The amount, frequency and duration of payments must be stated in the verifying documents. If an individual receives unemployment benefits as a regular part of his/her income, GMG requires copies of tax returns for the past two (2) years to establish a history of receipt. This income must be documented as on-going for a minimum of three (3) years.

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Dividends/Interest Income - Dividends and interest may be used as income provided the assets that are generating the dividend/interest income will not be used for the down payment or closing costs on the proposed loan. The applicant must provide tax returns for the previous two (2) years along with verification of current assets via bank statements, verification of deposits, etc. This income will be averaged over two (2) years or calculated at current market interest rates, whichever is less.