Key Words: Social Security income; non-taxable income; tax exempt income; Freddie mac
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When TAX EXEMPT INCOME is needed for qualification, the non-taxable portion of the income may be grossed up by 25% with some documents verifying that the income is nontaxable.
However, for Social Security income (i.e., retirement income, disability benefits, survivor benefits and Supplemental Security Income), we could gross up 15% of the income without obtaining any additional documentation if this is a Freddie Mac loan.
For example, if the Borrower’s Social Security income is $1,000/month, the we could gross up $150 (i.e., 15% of $1,000) without obtaining documentation that this portion of the income is tax exempt, as follows:
$150 x 25% = $37.50
$1,000 + $37.50 = $1,037.50
$1,037.50 can be used for qualifying without obtaining tax returns or other documentation evidencing that the income is tax exempt.
In addition, if we want to gross up the entire amount of income (i.e., $1,000) or other types of non-taxable income, a copy of the federal individual tax return for the most recent one year or other documentation evidencing the income is tax exempt should be provided.
Post time: Jan-20-2022