You can think of grossing up as extra credit. Now, this isn’t extra money. It doesn’t go into your bank account, but it is an additional amount we can put on paper when it comes to applying for a loan.

What’s an example of grossing up?

Say you make $1000 a month from foster care income. Foster care income, because it is non-taxable income, is almost always able to be grossed up. If you’re applying for a convention loan, you’d be able to gross up by 25% and if you’re applying for an FHA loan, you’d be able to gross that up by 15%. So, on the loan application, we’d list that income as $1250 or $1150 respectively.

What other incomes are typically allowed to be grossed up?

You are able to gross up incomes that are not taxed. The reason you are able to get “extra credit” on these nontaxable incomes is that there is less burden on them.

Other gross up able incomes include:

• Child Support Payments
• VA Benefits
• Workers’ Compensation
• Supplemental Social Security
• Adoption Income
• Foster Care Income

You should be aware though, that these incomes do not show up on your tax return, so you’re going to have to help your lender out by getting the required documentation from these sources and you’re also going to have to prove that you are going to continue to receive this income for the next three years.

There’s also income that is sometimes or partially able to be grossed up.

What income may be grossed up?

For some incomes, a portion of them is not taxable. These non-taxable portions can be grossed up. This applies to the following:

• Social Security Income
• Retirement Income
• Pension income
• Annuity Income
• IRA Distribution Income
• Housing Allowance Income
• Long Term Disability Income

Each of these shows up on tax returns, and whatever portion of it is not taxable we can take that amount and gross it up 25% for conventional loans and 15% for FHA.

If you have any questions about this or if you have any questions you’d like us to answer on our podcast, you can email your questions to team@azmortgagebrothers.com or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

•••

Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.

Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.

Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.

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