source:
  type: guide
  id: hud-4000-1-ii-c-income-requirements-total
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Income
    Requirements (TOTAL) (04/10/2025)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Income
    Requirements (TOTAL) (04/10/2025).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-c-income-requirements-total-full
  canonical_id: hud-4000-1-ii-c-income-requirements-total-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Income Requirements
    (TOTAL) (04/10/2025)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Income
      Requirements (TOTAL) (04/10/2025)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'c. Income Requirements (TOTAL) (04/10/2025) Definitions Effective
      Income refers to income that may be used to qualify a Borrower for a Mortgage.
      Tax Return refers to a U.S. federal income tax return or, for Borrowers who
      reside in Puerto Rico, Guam, the Virgin Islands, the Commonwealth of the Northern
      Mariana Islands, or American Samoa and who are not required to file U.S. federal
      income taxes, the Mortgagee must obtain the equivalent tax filing for the territory
      (a territory tax return). Standard Effective Income must be reasonably likely
      to continue through at least the first three years of the Mortgage, and meet
      the specific requirements described below. i. General Income Requirements (TOTAL)
      The Mortgagee must document the Borrower’s income and employment history, verify
      the accuracy of the amounts of income being reported, and determine if the income
      can be considered as Effective Income in accordance with the requirements listed
      below. The Mortgagee may only consider income if it is legally derived and,
      when required, properly reported as income on the Borrower’s Tax Returns. Negative
      income must be subtracted from the Borrower’s gross monthly income, and not
      treated as a recurring monthly liability unless otherwise noted. If FHA requires
      Tax Returns as required documentation for any type of Effective Income, the
      Mortgagee must also analyze the Tax Returns in accordance with Appendix 2.0
      – Analyzing IRS Forms. If the income documents are not received in English,
      the Mortgagee must provide a complete and accurate translation for each document.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 221 Last Revised: 11/26/2025 ii. Employment
      Related Income (TOTAL) (A) Definition Employment Income refers to income received
      as an employee of a business that is reported on IRS Form W-2, Wage and Tax
      Statement. (B) Standard The Mortgagee may use Employment related Income as Effective
      Income in accordance with the standards provided for each type of Employment
      related Income. (C) Required Documentation For all Employment related Income,
      the Mortgagee must verify the Borrower’s most recent two years of employment
      and income, and document current employment using either the traditional or
      alternative method, and past employment as applicable. (1) Traditional Current
      Employment Documentation The Mortgagee must obtain one of the following to verify
      current employment and income: • the most recent pay stub and a written Verification
      of Employment (VOE) covering two years; or • direct electronic verification
      of employment by a TPV vendor covering two years, subject to the following requirements:
      o the Borrower has authorized the Mortgagee to verify income and employment;
      and o the date of the data contained in the completed verification conforms
      with FHA requirements in Maximum Age of Mortgage Documents. Reverification of
      employment must be completed within 10 Days prior to the date of the Note. Verbal
      or electronic reverification of employment is acceptable. Electronic reverification
      employment data must be current within 30 days of the date of the verification.
      (2) Alternative Current Employment Documentation If using alternative documentation,
      the Mortgagee must: • obtain copies of the most recent pay stub that shows the
      Borrower’s year- to-date earnings; • obtain copies of the original IRS Form
      W-2s from the previous two years; and • document current employment by telephone,
      sign and date the verification documentation, and note the name, title, and
      telephone number of the person with whom employment was verified. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 222 Last Revised: 11/26/2025 Reverification of employment must
      be completed within 10 Days prior to the date of the Note. Verbal or electronic
      reverification of employment is acceptable. Electronic reverification employment
      data must be current within 30 days of the date of the verification. (3) Past
      Employment Documentation Direct verification of the Borrower’s employment and
      income history for the previous two years is not required if all of the following
      conditions are met: • The current employer confirms a two-year employment history,
      or a paystub reflects a hiring date. • Only base pay is used to qualify (no
      Overtime, Bonus, or Tip Income). • The Borrower executes IRS Form 4506, Request
      for Copy of Tax Return, IRS Form 4506-C, IVES Request for Transcript of Tax
      Return, or IRS Form 8821, Tax Information Authorization, for the previous two
      tax years. If the applicant has not been employed with the same employer for
      the previous two years and/or not all conditions immediately above can be met,
      then the Mortgagee must obtain one or a combination of the following for the
      most recent two years to verify the applicant’s employment history: • IRS Form
      W-2(s); • written VOE(s); • direct electronic verification by a TPV vendor,
      subject to the following requirements: o the Borrower has authorized the Mortgagee
      to verify income and employment; and o the date of the data contained in the
      completed verification conforms with FHA requirements in Maximum Age of Mortgage
      Documents; and/or • evidence supporting enrollment in school or the military
      during the most recent two full years. iii. Primary Employment (TOTAL) (A) Definitions
      Primary Employment is the Borrower’s principal employment, unless the income
      falls within a specific category identified below. Primary employment is generally
      full-time employment and may be either salaried or hourly. COVID-19 Related
      Economic Event refers to temporary loss of employment, temporary reduction of
      income, or temporary reduction of hours worked during the Presidentially-Declared
      COVID-19 National Emergency. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 223 Last Revised:
      11/26/2025 (B) Standard The Mortgagee may use primary Employment Income as Effective
      Income. (C) Calculation of Effective Income (1) Salary (a) Standard For employees
      who are salaried and whose income has been and will likely be consistently earned,
      the Mortgagee must use the current salary to calculate Effective Income. (b)
      Exception Due to COVID-19 Related Economic Event For employees who are salaried
      and whose current income will likely be consistently earned, the Mortgagee must
      use the current salary to calculate Effective Income. (2) Hourly (a) Standard
      For employees who are paid hourly and whose hours do not vary, the Mortgagee
      must consider the Borrower’s current hourly rate to calculate Effective Income.
      For employees who are paid hourly and whose hours vary, the Mortgagee must use
      the average of the income over the previous two years. If the Mortgagee can
      document an increase in pay rate the Mortgagee may use the most recent 12-month
      average of hours at the current pay rate. (b) Exception Due to COVID-19 Related
      Economic Event For employees who are paid hourly and whose hours do not vary,
      the Mortgagee must use the current hourly rate to calculate Effective Income.
      For employees who are paid hourly and whose hours vary, the Mortgagee must calculate
      the Effective Income by using the lesser of: • the average of the income in
      accordance with the Hourly Standard section above for the time period prior
      to the COVID-19 Related Economic Event; or • the average of the income earned
      since the COVID-19 Related Economic Event. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 224 Last Revised:
      11/26/2025 iv. Part-Time Employment (TOTAL) (A) Definition Part-Time Employment
      refers to employment that is not the Borrower’s primary employment and is generally
      performed for less than 40 hours per week. (B) Standard The Mortgagee may use
      Employment Income from Part-Time Employment as Effective Income if the Borrower
      has worked a part-time job uninterrupted for the past two years and the current
      position is reasonably likely to continue. (C) Calculation of Effective Income
      The Mortgagee must average the income over the previous two years. If the Mortgagee
      can document an increase in pay rate the Mortgagee may use a 12-month average
      of hours at the current pay rate. (D) Exception Due to COVID-19 Related Economic
      Event For employees who are paid hourly and whose hours do not vary, the Mortgagee
      must use the current hourly rate to calculate Effective Income. For employees
      who are paid hourly and whose hours vary, the Mortgagee must calculate the Effective
      Income by using the lesser of: • the average of the income in accordance with
      the Calculation of Effective Income section above for the time period prior
      to the COVID-19 Related Economic Event; or • the average of income earned since
      the COVID-19 Related Economic Event. v. Overtime, Bonus, or Tip Income (TOTAL)
      (A) Definition Overtime, Bonus, or Tip Income refers to income that the Borrower
      receives in addition to the Borrower’s normal salary. (B) Standard The Mortgagee
      may use Overtime, Bonus, or Tip Income as Effective Income if the Borrower has
      received this income for the past two years and it is reasonably likely to continue.
      Periods of Overtime, Bonus, or Tip Income less than two years may be considered
      Effective Income if the Mortgagee documents that the Overtime, Bonus, or Tip
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 225 Last Revised: 11/26/2025 Income has been
      consistently earned over a period of not less than one year and is reasonably
      likely to continue. (C) Calculation of Effective Income (1) Standard For employees
      with Overtime, Bonus, or Tip Income, the Mortgagee must calculate the Effective
      Income by using the lesser of: • the average Overtime, Bonus, or Tip Income
      earned over the previous two years or, if less than two years, the length of
      time Overtime, Bonus, or Tip Income has been earned; or • the average Overtime,
      Bonus, or Tip Income earned over the previous year. (2) Exception Due to COVID-19
      Related Economic Event For employees with Overtime, Bonus, or Tip Income, the
      Mortgagee must calculate the Effective Income by using the lesser of: • the
      average of the income in accordance with the Overtime, Bonus, or Tip Income
      Standard section above for the time period prior to the COVID-19 Related Economic
      Event; or • the average Overtime, Bonus, or Tip Income earned since the COVID-19
      Related Economic Event. vi. Seasonal Employment (TOTAL) (A) Definition Seasonal
      Employment refers to employment that is not year round, regardless of the number
      of hours per week the Borrower works on the job. (B) Standard The Mortgagee
      may consider Employment Income from Seasonal Employment as Effective Income
      if the Borrower has worked the same line of work for the past two years and
      is reasonably likely to be rehired for the next season. The Mortgagee may consider
      unemployment income as Effective Income for those with Effective Income from
      Seasonal Employment. (C) Required Documentation For seasonal employees with
      unemployment income, the Mortgagee must document the unemployment income for
      two full years and there must be reasonable assurance that this income will
      continue. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured
      Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL
      Mortgage Scorecard (TOTAL) Handbook 4000.1 226 Last Revised: 11/26/2025 (D)
      Calculation of Effective Income For employees with Employment Income from Seasonal
      Employment, the Mortgagee must average the income earned over the previous two
      full years to calculate Effective Income. vii. Employer Housing Subsidy (TOTAL)
      (A) Definition Employer Housing Subsidy refers to employer-provided mortgage
      assistance. (B) Standard The Mortgagee may utilize Employer Housing Subsidy
      as Effective Income. (C) Required Documentation The Mortgagee must verify and
      document the existence and the amount of the housing subsidy. (D) Calculation
      of Effective Income For employees receiving an Employer Housing Subsidy, the
      Mortgagee may add the Employer Housing Subsidy to the total Effective Income,
      but may not use it to offset the Mortgage Payment. viii. Employed by Family-Owned
      Business (TOTAL) (A) Definition Family-Owned Business Income refers to Employment
      Income earned from a business owned by the Borrower’s family, but in which the
      Borrower is not an owner. (B) Standard The Mortgagee may consider Family-Owned
      Business Income as Effective Income if the Borrower is not an owner in the family-owned
      business. (C) Required Documentation The Mortgagee must verify and document
      that the Borrower is not an owner in the family-owned business by using official
      business documents showing the ownership percentage. Official business documents
      include corporate resolutions or other business organizational documents, business
      Tax Returns or Schedule K-1 (IRS Form 1065), II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 227 Last Revised:
      11/26/2025 U.S. Return of Partnership Income, or an official letter from a certified
      public accountant on their business letterhead. In addition to traditional or
      alternative documentation requirements, the Mortgagee must obtain copies of
      signed personal Tax Returns or tax transcripts. (D) Calculation of Effective
      Income (1) Salary (a) Standard For employees who are salaried and whose income
      has been and will likely continue to be consistently earned, the Mortgagee must
      use the current salary to calculate Effective Income. (b) Exception Due to COVID-19
      Related Economic Event For employees who are salaried and whose income will
      likely be consistently earned, the Mortgagee must use the current salary to
      calculate Effective Income. (2) Hourly (a) Standard For employees who are paid
      hourly and whose hours do not vary, the Mortgagee must consider the Borrower’s
      current hourly rate to calculate Effective Income. For employees who are paid
      hourly and whose hours vary, the Mortgagee must average the income over the
      previous two years. If the Mortgagee can document an increase in pay rate the
      Mortgagee may use the most recent 12- month average of hours at the current
      pay rate. (b) Exception Due to COVID-19 Related Economic Event For employees
      who are paid hourly and whose hours do not vary, the Mortgagee must use the
      current hourly rate to calculate Effective Income. For employees who are paid
      hourly and whose hours vary, the Mortgagee must calculate the Effective Income
      by using the lesser of: • the average of the income in accordance with the Hourly
      Standard section above for the time period prior to the COVID-19 Related Economic
      Event; or • the average of the income earned since the COVID-19 Related Economic
      Event. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured
      Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL
      Mortgage Scorecard (TOTAL) Handbook 4000.1 228 Last Revised: 11/26/2025 ix.
      Commission Income (TOTAL) (A) Definition Commission Income refers to income
      that is paid contingent upon the conducting of a business transaction or the
      performance of a service. (B) Standard The Mortgagee may use Commission Income
      as Effective Income if the Borrower earned the income for at least one year
      in the same or similar line of work and it is reasonably likely to continue.
      (C) Required Documentation For all Commission Income, the Mortgagee must use
      traditional or alternative employment documentation. (D) Calculation of Effective
      Income (1) Standard The Mortgagee must calculate Effective Income for commission
      by using the lesser of: • the average Commission Income earned over either:
      o the previous two years; or o the length of time Commission Income has been
      earned if less than two years; or • the average Commission Income earned over
      the previous year. (2) Exception Due to COVID-19 Related Economic Event For
      employees with Commission Income, the Mortgagee must calculate the Effective
      Income by using the lesser of: • the average of the income in accordance with
      the Commission Income Standard section above for the time period prior to the
      COVID-19 Related Economic Event; or • the average of the Commission Income earned
      since the COVID-19 Related Economic Event. x. Self-Employment Income (TOTAL)
      (A) Definition Self-Employment Income refers to income generated by a business
      in which the Borrower has a 25 percent or greater ownership interest. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 229 Last Revised: 11/26/2025 There are four basic types of business
      structures. They include: • sole proprietorships; • corporations; • limited
      liability or “S” corporations; and • partnerships. (B) Standard (1) Minimum
      Length of Self-Employment The Mortgagee may consider Self-Employment Income
      if the Borrower has been self-employed for at least two years. If the Borrower
      has been self-employed between one and two years, the Mortgagee may only consider
      the income as Effective Income if the Borrower was previously employed in the
      same line of work in which the Borrower is self- employed or in a related occupation
      for at least two years. (2) Stability of Self-Employment Income Income obtained
      from businesses with annual earnings that are stable or increasing is acceptable.
      If the income from businesses shows a greater than 20 percent decline in Effective
      Income over the analysis period, the Mortgagee must downgrade and manually underwrite.
      (3) Exception Due to COVID-19 Related Economic Event The Mortgagee may consider
      Self-Employment Income if the Borrower has an aggregate self-employment history
      before and after the COVID-19 Related Economic Event totaling two years. If
      the Borrower has an aggregate self-employment history before and after the COVID-19
      Related Economic Event totaling between one and two years, the Mortgagee may
      only consider the income as Effective Income if the Borrower was previously
      employed in the same line of work in which the Borrower is self- employed or
      in a related occupation for at least two years. For self-employed Borrowers
      with a COVID-19 Related Economic Event that have since regained income at a
      level less than 80 percent of their income prior to the COVID-19 Related Economic
      Event, the Mortgagee must downgrade and manually underwrite. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 230 Last Revised: 11/26/2025 (C) Required Documentation (1)
      Individual and Business Tax Returns The Mortgagee must obtain complete individual
      Tax Returns for the most recent two years, including all schedules. The Mortgagee
      must obtain the Borrower’s business Tax Returns for the most recent two years
      unless the following criteria are met: • individual Tax Returns show increasing
      Self-Employment Income over the past two years; • funds to close are not coming
      from business accounts; and • the Mortgage to be insured is not a cash-out refinance.
      In lieu of signed individual or business Tax Returns from the Borrower, the
      Mortgagee may obtain a signed IRS Form 4506, IRS Form 4506-C, or IRS Form 8821,
      and tax transcripts directly from the IRS. (2) Profit & Loss Statements and
      Balance Sheets The Mortgagee must obtain a year-to-date Profit and Loss (P&L)
      statement and balance sheet if more than a calendar quarter has elapsed since
      the date of the most recent calendar or fiscal year-end tax period. A balance
      sheet is not required for self-employed Borrowers filing Schedule C income.
      If income used to qualify the Borrower exceeds the two-year average of Tax Returns,
      an audited P&L or signed quarterly Tax Return must be obtained from the IRS.
      (3) Exception Due to COVID-19 Related Economic Event For self-employed Borrowers
      with a reduction of income due to a COVID-19 Related Economic Event, the Mortgagee
      must provide the following documentation in addition to the current Self-Employment
      Income required documentation: • letter of explanation for the time period of
      income loss or reduction; • the Borrower’s business Tax Returns for the most
      recent two years; and • either of the following: o an audited year-to-date P&L
      statement reporting business revenue, expenses, and net income up to and including
      the most recent month preceding the case assignment date; or o an unaudited
      year-to-date P&L statement signed by the Borrower reporting business revenue,
      expenses, and net income up to and including the most recent month preceding
      the case assignment date, and three of the most recent business bank statements
      no older than the latest three months represented on the year-to-date P&L statement.
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 231 Last Revised: 11/26/2025 Monthly deposits
      on the business bank statements must support the earnings on the unaudited year-to-date
      P&L. (D) Calculation of Effective Income (1) Standard The Mortgagee must analyze
      the Borrower’s Tax Returns to determine gross Self- Employment Income. Requirements
      for analyzing self-employment documentation are found in Analyzing IRS Forms.
      The Mortgagee must calculate gross Self-Employment Income by using the lesser
      of: • the average gross Self-Employment Income earned over either: o the previous
      two years; or o the length of time Self-Employment Income has been earned if
      less than two years (where permitted); or • the average gross Self-Employment
      Income earned over the previous one year. (2) Exception Due to COVID-19 Related
      Economic Event For self-employed Borrowers with a COVID-19 Related Economic
      Event that have since regained income at a level greater than or equal to 80
      percent of their income prior to the COVID-19 Related Economic Event for a minimum
      of six months, the Mortgagee must calculate gross Self-Employment Income by
      using the lesser of: • the average gross Self-Employment Income earned over
      the previous two years prior to the COVID-19 Related Economic Event; or • the
      average gross Self-Employment Income earned over the previous six months after
      the COVID-19 Related Economic Event. xi. Additional Required Analysis of Stability
      of Employment Income (TOTAL) (A) Frequent Changes in Employment If the Borrower
      has changed employers more than three times in the previous 12- month period,
      or has changed lines of work, the Mortgagee must take additional steps to verify
      and document the stability of the Borrower’s Employment Income. Additional analysis
      is not required for fields of employment that regularly require a Borrower to
      work for various employers (such as Temp Companies or Union Trades). The Mortgagee
      must obtain: • transcripts of training and education demonstrating qualification
      for a new position; or • employment documentation evidencing continual increases
      in income and/or benefits. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 232 Last Revised:
      11/26/2025 (B) Addressing Gaps in Employment For Borrowers with gaps in employment
      of six months or more (an extended absence), the Mortgagee may consider the
      Borrower’s current income as Effective Income if it can verify and document
      that: • the Borrower has been employed in the current line of work for at least
      six months at the time of case number assignment; and • a two-year work history
      prior to the absence from employment using standard or alternative employment
      verification. (C) Addressing Temporary Reduction in Income For Borrowers with
      a temporary reduction of income due to a short-term disability or similar temporary
      leave, the Mortgagee may consider the Borrower’s current income as Effective
      Income, if it can verify and document that: • the Borrower intends to return
      to work; • the Borrower has the right to return to work; and • the Borrower
      qualifies for the Mortgage taking into account any reduction of income due to
      the circumstance. For federal, state, tribal, or local government employees
      temporarily out of work due to a government shutdown or other similar, temporary
      events (where lost income is anticipated to be recovered), income preceding
      the shutdown can be considered as Effective Income. For Borrowers returning
      to work before or at the time of the first Mortgage Payment due date, the Mortgagee
      may use the Borrower’s pre-leave income as Effective Income. For Borrowers returning
      to work after the first Mortgage Payment due date, the Mortgagee may use the
      Borrower’s current income plus available surplus liquid asset Reserves, above
      and beyond any required Reserves, as an income supplement up to the amount of
      the Borrower’s pre-leave income as Effective Income. The amount of the monthly
      income supplement is the total amount of surplus Reserves divided by the number
      of months between the first payment due date and the Borrower’s intended date
      of return to work. Required Documentation The Mortgagee must provide the following
      documentation for Borrowers on temporary leave: • a written statement from the
      Borrower confirming the Borrower’s intent to return to work, and the intended
      date of return; • documentation generated by current employer confirming the
      Borrower’s eligibility to return to current employer after temporary leave;
      and II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 233 Last Revised: 11/26/2025 • documentation
      of sufficient liquid assets, in accordance with Sources of Funds, used to supplement
      the Borrower’s income through intended date of return to work with current employer.
      (D) Addressing Gaps in Employment or Reduction of Income Due to COVID-19 Related
      Economic Event (1) Employment Income For Borrowers with gaps in employment,
      reduction of income, or reduction of hours due to a COVID-19 Related Economic
      Event, the Mortgagee may consider the Borrower’s income calculated in accordance
      with the Exception Due to COVID-19 Related Economic Event for the applicable
      income type as Effective Income if it can verify and document that: • the Borrower
      has been employed in the current job or same line of work for at least one month
      at the time of case number assignment; or • the Borrower has been employed in
      a different job or line of work for at least six months at the time of case
      number assignment; and the Borrower has an aggregate two-year work history prior
      to case number assignment excluding gaps in employment, using traditional or
      alternative employment verification. Required Documentation The Mortgagee must
      obtain a written VOE identifying the time period of temporary loss of employment,
      temporary loss of income, or temporary loss of hours. (2) Self-Employment Income
      For Borrowers with gaps in self-employment, reduction in income, or reduction
      of hours due to a COVID-19 Related Economic Event, the Mortgagee may exclude
      the months where the business was closed, or income was reduced when calculating
      Effective Income. The total time period of the Borrower’s self- employment must
      still meet the minimum length of self-employment in accordance with Exception
      Due to COVID-19 Related Economic Event. xii. Other Sources of Effective Income
      (TOTAL) (A) Disability Benefits (TOTAL) (1) Definition Disability Benefits are
      benefits received from the Social Security Administration (SSA), Department
      of Veterans Affairs (VA), other public agencies, or a private disability insurance
      provider. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured
      Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL
      Mortgage Scorecard (TOTAL) Handbook 4000.1 234 Last Revised: 11/26/2025 (2)
      Required Documentation The Mortgagee must verify and document the Borrower’s
      receipt of benefits from the SSA, VA, or private disability insurance provider.
      The Mortgagee must obtain documentation that establishes award benefits to the
      Borrower. If any disability income is due to expire within three years from
      the date of mortgage application, that income cannot be used as Effective Income.
      If the Notice of Award or equivalent document does not have a defined expiration
      date, the Mortgagee may consider the income effective and reasonably likely
      to continue. The Mortgagee may not rely upon a pending or current re-evaluation
      of medical eligibility for benefit payments as evidence that the benefit payment
      is not reasonably likely to continue. Under no circumstance may the Mortgagee
      inquire into or request documentation concerning the nature of the disability
      or the medical condition of the Borrower. (a) Social Security Disability For
      Social Security Disability income, including Supplemental Security Income (SSI),
      the Mortgagee must obtain a copy of the last Notice of Award letter, or an equivalent
      document that establishes award benefits to the Borrower, and one of the following
      documents: • Tax Returns; • the most recent bank statement evidencing receipt
      of income from the SSA; • a Proof of Income Letter, also known as a “Budget
      Letter” or “Benefits Letter” that evidences income from the SSA; or • a copy
      of the Borrower’s form SSA-1099/1042S, Social Security Benefit Statement. (b)
      Department of Veterans Affairs Disability For VA disability benefits, the Mortgagee
      must obtain from the Borrower a copy of the veteran’s last Benefits Letter showing
      the amount of the assistance, and one of the following documents: • Tax Returns;
      or • the most recent bank statement evidencing receipt of income from the VA.
      If the Benefits Letter does not have a defined expiration date, the Mortgagee
      may consider the income effective and reasonably likely to continue for at least
      three years. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured
      Housing Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL
      Mortgage Scorecard (TOTAL) Handbook 4000.1 235 Last Revised: 11/26/2025 (c)
      Private Disability For private disability benefits, the Mortgagee must obtain
      documentation from the private disability insurance provider showing the amount
      of the assistance and the expiration date of the benefits, if any, and one of
      the following documents: • Tax Returns; or • the most recent bank statement
      evidencing receipt of income from the insurance provider. (3) Calculation of
      Effective Income The Mortgagee must use the most recent amount of benefits received
      to calculate Effective Income. (B) Alimony, Child Support, and Maintenance Income
      (TOTAL) (1) Definition Alimony, Child Support, and Maintenance Income refers
      to income received from a former spouse or partner or from a noncustodial parent
      of the Borrower’s minor dependent. (2) Required Documentation The Mortgagee
      must obtain a fully executed copy of the Borrower’s final divorce decree, legal
      separation agreement, court order, or voluntary payment agreement with documented
      receipt. When using a final divorce decree, legal separation agreement or court
      order, the Mortgagee must obtain evidence of receipt using deposits on bank
      statements; canceled checks; or documentation from the child support agency
      for the most recent three months that supports the amount used in qualifying.
      The Mortgagee must document the voluntary payment agreement with 12 months of
      canceled checks, deposit slips, or Tax Returns. The Mortgagee must provide evidence
      that the claimed income will continue for at least three years. The Mortgagee
      may use the front and pertinent pages of the divorce decree/settlement agreement
      and/or court order showing the financial details. (3) Calculation of Effective
      Income When using a final divorce decree, legal separation agreement or court
      order, if the Borrower has received consistent Alimony, Child Support, and Maintenance
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 236 Last Revised: 11/26/2025 Income for the
      most recent three months, the Mortgagee may use the current payment to calculate
      Effective Income. When using evidence of voluntary payments, if the Borrower
      has received consistent Alimony, Child Support, and Maintenance Income for the
      most recent six months, the Mortgagee may use the current payment to calculate
      Effective Income. If the Alimony, Child Support, and Maintenance Income have
      not been consistently received for the most recent three months if court ordered
      or six months if voluntary, the Mortgagee must use the average of the income
      received over the previous two years to calculate Effective Income. If Alimony,
      Child Support, and Maintenance Income have been received for less than two years,
      the Mortgagee must use the average over the time of receipt. (C) Military Income
      (TOTAL) (1) Definition Military Income refers to income received by military
      personnel during their period of active, Reserve, or National Guard service,
      including: • base pay • Basic Allowance for Housing • clothing allowances •
      flight or hazard pay • Basic Allowance for Subsistence • proficiency pay The
      Mortgagee may not use military education benefits as Effective Income. (2) Required
      Documentation The Mortgagee must obtain a copy of the Borrower’s military Leave
      and Earnings Statement (LES). The Mortgagee must verify the Expiration Term
      of Service date on the LES. If the Expiration Term of Service date is within
      the first 12 months of the Mortgage, Military Income may only be considered
      Effective Income if the Borrower represents their intent to continue military
      service. (3) Calculation of Effective Income The Mortgagee must use the current
      amount of Military Income received to calculate Effective Income. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 237 Last Revised: 11/26/2025 (D) Mortgage Credit Certificates
      (TOTAL) (1) Definition Mortgage Credit Certificates refer to government Mortgage
      Payment subsidies other than Section 8 Housing Choice Vouchers. (2) Required
      Documentation The Mortgagee must verify and document the amount of the tax rebate.
      (3) Calculating Effective Income Mortgage Credit Certificate income may be included
      as Effective Income. The Mortgagee must use the current subsidy rate to calculate
      the Effective Income. (E) Section 8 Housing Choice Vouchers (TOTAL) (1) Definition
      Section 8 Housing Choice Vouchers refer to housing subsidies received under
      the Housing Choice Voucher homeownership option from a Public Housing Agency
      (PHA). (2) Required Documentation The Mortgagee must verify and document the
      Borrower’s receipt of the Housing Choice Voucher homeownership subsidies. The
      Mortgagee may consider that this income is reasonably likely to continue for
      three years. (3) Calculation of Effective Income The Mortgagee may only use
      Section 8 Housing Choice Voucher subsidies as Effective Income if it is not
      used as an offset to the monthly Mortgage Payment. The Mortgagee must use the
      current subsidy rate to calculate the Effective Income. (F) Other Public Assistance
      (TOTAL) (1) Definition Public Assistance refers to income received from government
      assistance programs. (2) Required Documentation Mortgagees must verify and document
      the income received from the government agency. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 238 Last Revised:
      11/26/2025 If any Public Assistance income is due to expire within three years
      from the date of mortgage application, that income cannot be used as Effective
      Income. If the documentation does not have a defined expiration date, the Mortgagee
      may consider the income effective and reasonably likely to continue. (3) Calculation
      of Effective Income The Mortgagee must use the current rate of Public Assistance
      received to calculate Effective Income. (G) Automobile Allowances (TOTAL) (1)
      Definition Automobile Allowance refers to the funds provided by the Borrower’s
      employer for automobile related expenses. (2) Required Documentation The Mortgagee
      must verify and document the Automobile Allowance received from the employer
      for the previous two years. (3) Calculation of Effective Income The Mortgagee
      must use the full amount of the Automobile Allowance to calculate Effective
      Income. (H) Retirement Income (TOTAL) Retirement Income refers to income received
      from Pensions, 401(k) distributions, and Social Security. (1) Social Security
      Income (TOTAL) (a) Definition Social Security Income or Supplemental Security
      Income (SSI) refers to income received from the SSA other than disability income.
      (b) Required Documentation The Mortgagee must verify and document the Borrower’s
      receipt of income from the SSA and that it is likely to continue for at least
      a three-year period from the date of case number assignment. For SSI, the Mortgagee
      must obtain any one of the following documents: • Tax Returns; II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 239 Last Revised: 11/26/2025 • the most recent bank statement
      evidencing receipt of income from the SSA; • a Proof of Income Letter, also
      known as a “Budget Letter” or “Benefits Letter” that evidences income from the
      SSA; or • a copy of the Borrower’s form SSA-1099/1042S. In addition to verification
      of income, the Mortgagee must document the continuance of this income by obtaining
      from the Borrower (1) a copy of the last Notice of Award letter which states
      the SSA’s determination on the Borrower’s eligibility for SSA income or (2)
      an equivalent document that establishes award benefits to the Borrower (equivalent
      document). If any income from the SSA is due to expire within three years from
      the date of case number assignment, that income may not be used for qualifying.
      If the Notice of Award or equivalent document does not have a defined expiration
      date, the Mortgagee must consider the income effective and reasonably likely
      to continue. The Mortgagee may not request additional documentation from the
      Borrower to demonstrate continuance of Social Security Administration income.
      If the Notice of Award letter or equivalent document specifies a future start
      date for receipt of income, this income may only be considered effective on
      the specified start date. (c) Calculation of Effective Income The Mortgagee
      must use the current amount of Social Security Income received to calculate
      Effective Income. (2) Pension (TOTAL) (a) Definition Pension refers to income
      received from the Borrower’s former employer(s). (b) Required Documentation
      The Mortgagee must verify and document the Borrower’s receipt of periodic payments
      from the Borrower’s Pension and that the payments are likely to continue for
      at least three years. The Mortgagee must obtain any one of the following documents:
      • Tax Returns; • the most recent bank statement evidencing receipt of income
      from the former employer; or • a copy of the Borrower’s Pension/retirement letter
      from the former employer. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A.
      Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 240 Last Revised:
      11/26/2025 (c) Calculation of Effective Income The Mortgagee must use the current
      amount of Pension income received to calculate Effective Income. (3) Individual
      Retirement Account and 401(k) (TOTAL) (a) Definition Individual Retirement Account
      (IRA)/401(k) Income refers to income received from an IRA. (b) Required Documentation
      The Mortgagee must verify and document the Borrower’s receipt of recurring IRA/401(k)
      distribution Income and that it is reasonably likely to continue for three years.
      The Mortgagee must obtain the most recent IRA/401(k) statement and any one of
      the following documents: • Tax Returns; or • the most recent bank statement
      evidencing receipt of income. (c) Calculation of Effective Income For Borrowers
      with IRA/401(k) Income that has been and will be consistently received, the
      Mortgagee must use the current amount of IRA Income received to calculate Effective
      Income. For Borrowers with fluctuating IRA/401(k) Income, the Mortgagee must
      use the average of the IRA/401(k) Income received over the previous two years
      to calculate Effective Income. If IRA/401(k) Income has been received for less
      than two years, the Mortgagee must use the average over the time of receipt.
      (I) Rental Income (TOTAL) (1) Definition Rental Income refers to income received
      or to be received from the subject Property or other real estate holdings. (2)
      Rental Income Received from the Subject Property (TOTAL) (a) Standard The Mortgagee
      may consider Rental Income from existing and prospective renters if documented
      in accordance with the following requirements. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 241 Last Revised:
      11/26/2025 Rental Income from the subject Property may be considered Effective
      Income when the Property is or will be a one-unit dwelling with an ADU, a two-
      to four-unit dwelling, or an acceptable one- to four-unit Investment Property.
      No income from commercial space may be included in Rental Income calculations.
      (b) Required Documentation Documentation varies depending upon the length of
      time the Borrower has owned the Property and must meet one of the applicable
      documentation requirements below: (i) Limited or No History of Rental Income
      Where the Borrower does not have a history of Rental Income from the subject
      since the previous tax filing: Two- to Four-Units The Mortgagee must verify
      and document the proposed Rental Income by obtaining an appraisal showing fair
      market rent (use Fannie Mae Form 1025/Freddie Mac Form 72, Small Residential
      Income Property Appraisal Report) and, if available, the prospective leases.
      One-Unit The Mortgagee must verify and document the proposed Rental Income by
      obtaining a Fannie Mae Form 1004/Freddie Mac Form 70, Uniform Residential Appraisal
      Report (URAR), and a Fannie Mae Form 1007/Freddie Mac Form 1000, Single Family
      Comparable Rent Schedule, showing fair market rent and, if available, the prospective
      leases. One-Unit with an Accessory Dwelling Unit The Mortgagee must verify and
      document the proposed Rental Income from the ADU by obtaining a Fannie Mae Form
      1004/Freddie Mac Form 70, Uniform Residential Appraisal Report (URAR), and a
      Fannie Mae Form 1007/Freddie Mac Form 1000, Single Family Comparable Rent Schedule,
      showing fair market rent and, if available, the prospective leases. (ii) History
      of Rental Income Where the Borrower has a history of Rental Income from the
      subject Property since the previous tax filing, the Mortgagee must verify and
      II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing
      Programs Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage
      Scorecard (TOTAL) Handbook 4000.1 242 Last Revised: 11/26/2025 document the
      existing Rental Income by obtaining the Borrower’s most recent Tax Returns,
      including Schedule E, from the previous two years. For Properties owned less
      than two years, the Mortgagee must document the date of acquisition by providing
      a copy of the deed, Closing Disclosure, or other similar legal document. (c)
      Calculation of Effective Income The Mortgagee must add the net subject property
      Rental Income to the Borrower’s gross income to calculate Effective Income.
      The Mortgagee may not reduce the Borrower’s total Mortgage Payment by the net
      subject property Rental Income. (i) Limited or No History of Rental Income To
      calculate the Effective Income from the subject Property where the Borrower
      does not have a history of Rental Income from the subject Property since the
      previous tax filing, the Mortgagee must use 75 percent of the lesser of: • fair
      market rent reported by the Appraiser; or • the rent reflected in the lease
      or other rental agreement. One-Unit with an Accessory Dwelling Unit The amount
      of the Rental Income from an ADU used as Effective Income must not exceed 30
      percent of the total monthly Effective Income used to qualify the Borrower.
      (ii) History of Rental Income The Mortgagee must calculate the Rental Income
      by averaging the amount shown on Schedule E. Depreciation, mortgage interest,
      taxes, insurance, and any HOA dues shown on Schedule E may be added back to
      the net income or loss. If the Property has been owned for less than two years,
      the Mortgagee must annualize the Rental Income for the length of time the Property
      has been owned. (3) Rental Income from Other Real Estate Holdings (TOTAL) (a)
      Standard Rental Income from other real estate holdings may be considered Effective
      Income if the documentation requirements listed below are met. II. ORIGINATION
      THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward
      Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL)
      Handbook 4000.1 243 Last Revised: 11/26/2025 If Rental Income is being derived
      from a Property being vacated by the Borrower, the Borrower must be relocating
      to an area more than 100 miles from the Borrower’s current Principal Residence.
      The Mortgagee must obtain a lease agreement of at least one year’s duration
      after the Mortgage is closed and evidence of the payment of the security deposit
      or first month’s rent. (b) Required Documentation (i) Limited or No History
      of Rental Income Where the Borrower does not have a history of Rental Income
      for the Property since the previous tax filing, including Property being vacated
      by the Borrower, the Mortgagee must obtain an appraisal evidencing market rent
      and that the Borrower has at least 25 percent equity in the Property. The appraisal
      is not required to be completed by an FHA Roster Appraiser. Two- to Four-Units
      The Mortgagee must verify and document the proposed Rental Income by obtaining
      an appraisal showing fair market rent (use Fannie Mae Form 1025/Freddie Mac
      Form 72, Small Residential Income Property Appraisal Report) and, if available,
      the prospective leases. One-Unit or One-Unit with an Accessory Dwelling Unit
      The Mortgagee must verify and document the proposed Rental Income by obtaining
      a Fannie Mae Form 1004/Freddie Mac Form 70, Uniform Residential Appraisal Report
      (URAR), and a Fannie Mae Form 1007/Freddie Mac Form 1000, Single Family Comparable
      Rent Schedule, showing fair market rent and, if available, the prospective leases.
      (ii) History of Rental Income The Mortgagee must obtain the Borrower’s last
      two years’ Tax Returns with Schedule E. (c) Calculation of Effective Net Rental
      Income (i) Limited or No History of Rental Income To calculate the effective
      net Rental Income from other real estate holdings where the Borrower does not
      have a history of Rental Income since the previous tax filing, the Mortgagee
      must deduct the Principal, Interest, Taxes, and Insurance (PITI) from 75 percent
      of the lesser of: • fair market rent reported by the Appraiser; or • the rent
      reflected in the lease or other rental agreement. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 244 Last Revised:
      11/26/2025 (ii) History of Net Rental Income The Mortgagee must calculate the
      net Rental Income by averaging the amount shown on the Schedule E provided the
      Borrower continues to own all Properties included on the Schedule E. Depreciation,
      mortgage interest, taxes, insurance, and any HOA dues shown on Schedule E may
      be added back to the net income or loss. Positive net Rental Income must be
      added to the Borrower’s Effective Income. Negative net Rental Income must be
      included as a debt/liability. If the Property has been owned for less than two
      years, the Mortgagee must: • annualize the Rental Income for the length of time
      the Property has been owned; and • document the date of acquisition by providing
      the deed, Closing Disclosure, or similar legal document. (4) Boarders of the
      Subject Property (TOTAL) (a) Definition Boarder refers to an individual renting
      space inside the Borrower’s Dwelling Unit. A renter of an ADU is not a Boarder.
      (b) Standard The Mortgagee may consider Rental Income from existing Boarders
      if documented in accordance with the following requirements. Rental Income from
      Boarders may be considered Effective Income if the occupying Borrower has a
      12-month history of receiving income from Boarders and is currently receiving
      Boarder income. Rental Income from Boarders is permitted whether the Borrower
      currently rents or owns the Dwelling Unit. (c) Required Documentation The Mortgagee
      must verify and document the existing Rental Income from Boarders by obtaining
      the following: • evidence of rental history over the previous 12 months; • evidence
      of Rental Income received from Boarders for at least nine of the most recent
      12 months in the form of: • the Borrower’s Tax Returns; or II. ORIGINATION THROUGH
      POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs Forward Mortgages
      4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard (TOTAL) Handbook
      4000.1 245 Last Revised: 11/26/2025 • bank statements, canceled checks, or deposit
      slips, showing rental payments received; • evidence that the Boarder’s address
      is the same as the Borrower’s address; and • a copy of the executed written
      agreement documenting the boarding terms and the Boarder’s intent to continue
      boarding with the Borrower. (d) Calculation of Effective Income The Mortgagee
      must calculate Rental Income from Boarders by using the lesser of: • the 12-month
      average; or • the current rent as documented in the written agreement. Where
      Rental Income from Boarders has been documented for at least nine of the last
      12 months, the Mortgagee must average the Rental Income over a 12- month period.
      The amount of the Rental Income from Boarders used as Effective Income must
      not exceed 30 percent of the total monthly Effective Income used to qualify
      the Borrower. (J) Investment Income (TOTAL) (1) Definition Investment Income
      refers to interest and dividend income received from assets such as certificates
      of deposits, mutual funds, stocks, bonds, money markets, and savings and checking
      accounts. (2) Required Documentation The Mortgagee must verify and document
      the Borrower’s Investment Income by obtaining Tax Returns for the previous two
      years and the most recent account statement. (3) Calculation of Effective Income
      The Mortgagee must calculate Investment Income by using the lesser of: • the
      average Investment Income earned over the previous two years; or • the average
      Investment Income earned over the previous one year. The Mortgagee must subtract
      any of the assets used for the Borrower’s required funds to close to purchase
      the subject Property from the Borrower’s liquid assets prior to calculating
      any interest or dividend income. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 246 Last Revised:
      11/26/2025 (K) Capital Gains and Losses (TOTAL) (1) Definition Capital Gains
      refer to a profit that results from a disposition of a capital asset, such as
      a stock, bond or real estate, where the amount realized on the disposition exceeds
      the purchase price. Capital Losses refer to a loss that results from a disposition
      of a capital asset, such as a stock, bond or real estate, where the amount realized
      on the disposition is less than the purchase price. (2) Standard Capital gains
      or losses must be considered when determining Effective Income, when the individual
      has a constant turnover of assets resulting in gains or losses. (3) Required
      Documentation Three years’ Tax Returns are required to evaluate an earnings
      trend. If the trend: • results in a gain, it may be added as Effective Income;
      or • consistently shows a loss, it must be deducted from the total income. (L)
      Expected Income (TOTAL) (1) Definition Expected Income refers to income from
      cost-of-living adjustments, performance raises, a new job, or retirement that
      has not been, but will be received within 60 Days of mortgage closing. (2) Standard
      The Mortgagee may consider Expected Income as Effective Income except when Expected
      Income is to be derived from a family-owned business. (3) Required Documentation
      The Mortgagee must verify and document the existence and amount of Expected
      Income with the employer in writing and that it is guaranteed to begin within
      60 Days of mortgage closing. For expected Retirement Income, the Mortgagee must
      verify the amount and that it is guaranteed to begin within 60 Days of the mortgage
      closing. (4) Calculation of Effective Income Income is calculated in accordance
      with the standards for the type of income being received. The Mortgagee must
      also verify that the Borrower will have II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 247 Last Revised:
      11/26/2025 sufficient income or cash Reserves to support the Mortgage Payment
      and any other obligations between mortgage closing and the beginning of the
      receipt of the income. (M) Trust Income (TOTAL) (1) Definition Trust Income
      refers to income that is regularly distributed to a Borrower from a trust. (2)
      Required Documentation The Mortgagee must verify and document the existence
      of the Trust Agreement or other trustee statement. The Mortgagee must also verify
      and document the frequency, duration, and amount of the distribution by obtaining
      a bank statement or transaction history from the bank. The Mortgagee must verify
      that regular payments will continue for at least the first three years of the
      mortgage term. (3) Calculation of Effective Income The Mortgagee must use the
      income based on the terms and conditions in the Trust Agreement or other trustee
      statement to calculate Effective Income. (N) Annuities or Similar (TOTAL) (1)
      Definition Annuity Income refers to a fixed sum of money periodically paid to
      the Borrower from a source other than employment. (2) Required Documentation
      The Mortgagee must verify and document the legal agreement establishing the
      annuity and guaranteeing the continuation of the annuity for the first three
      years of the Mortgage. The Mortgagee must also obtain a bank statement or a
      transaction history from a bank evidencing receipt of the annuity. (3) Calculation
      of Effective Income The Mortgagee must use the current rate of the annuity to
      calculate Effective Income. The Mortgagee must subtract any of the assets used
      for the Borrower’s required funds to close to purchase the subject Property
      from the Borrower’s liquid assets prior to calculating any Annuity Income. II.
      ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title II Insured Housing Programs
      Forward Mortgages 4. Underwriting the Borrower Using the TOTAL Mortgage Scorecard
      (TOTAL) Handbook 4000.1 248 Last Revised: 11/26/2025 (O) Notes Receivable Income
      (TOTAL) (1) Definition Notes Receivable Income refers to income received by
      the Borrower as payee or holder in due course of a promissory Note or similar
      credit instrument. (2) Required Documentation The Mortgagee must verify and
      document the existence of the Note. The Mortgagee must also verify and document
      that payments have been consistently received for the previous 12 months by
      obtaining Tax Returns, deposit slips, or canceled checks and that such payments
      are guaranteed to continue for the first three years of the Mortgage. (3) Calculation
      of Effective Income For Borrowers who have been and will be receiving a consistent
      amount of Notes Receivable Income, the Mortgagee must use the current rate of
      income to calculate Effective Income. For Borrowers whose Notes Receivable Income
      fluctuates, the Mortgagee must use the average of the Notes Receivable Income
      received over the previous year to calculate Effective Income. (P) Nontaxable
      Income (Grossing Up) (TOTAL) (1) Definition Nontaxable Income refers to types
      of income not subject to federal taxes, which includes, but is not limited to:
      • some portion of Social Security Income; • some federal government employee
      Retirement Income; • Railroad Retirement benefits; • some state government Retirement
      Income; • certain types of disability and Public Assistance payments; • Child
      Support; • Section 8 Housing Choice Vouchers; • military allowances; and • other
      income that is documented as being exempt from federal income taxes. (2) Required
      Documentation The Mortgagee must document and support the amount of income to
      be Grossed Up for any Nontaxable Income source and the current tax rate applicable
      to the Borrower’s income that is being Grossed Up. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT
      A. Title II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower
      Using the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 249 Last Revised:
      11/26/2025 (3) Calculation of Effective Income The amount of continuing tax
      savings attributed to Nontaxable Income may be added to the Borrower’s gross
      income. The percentage of Nontaxable Income that may be added cannot exceed
      the greater of 15 percent or the appropriate tax rate for the income amount,
      based on the Borrower’s tax rate for the previous year. If the Borrower was
      not required to file a Tax Return for the previous tax reporting period, the
      Mortgagee may Gross Up the Nontaxable Income by 15 percent. The Mortgagee may
      not make any additional adjustments or allowances based on the number of the
      Borrower’s dependents. (Q) Foster Care Payment (1) Definition Foster Care Payment
      refers to payment received from a state- or county- sponsored organization for
      providing temporary care for one or more individuals. (2) Standard Foster care
      payment may be considered acceptable and stable income if the Borrower has a
      two-year history of providing foster care services and receiving foster care
      payment and that the foster care payment is reasonably likely to continue. (3)
      Required Documentation The Mortgagee must obtain a written verification of foster
      care payment from the organization providing it, verify and document that the
      Borrower has a two-year history of providing foster care services and receiving
      foster care payment, and that the foster care payment is reasonably likely to
      continue. (4) Calculation of Effective Income The Mortgagee must calculate foster
      care payment by using the lesser of: • average foster care payment received
      over the previous two years; or • average foster care payment received over
      the previous year. II. ORIGINATION THROUGH POST-CLOSING/ENDORSEMENT A. Title
      II Insured Housing Programs Forward Mortgages 4. Underwriting the Borrower Using
      the TOTAL Mortgage Scorecard (TOTAL) Handbook 4000.1 250 Last Revised: 11/26/2025
      (R) Foreign Income (1) Definition Foreign Income refers to income received by
      a Borrower from sources located outside of the United States by a foreign corporation
      or a foreign government and is paid in foreign currency. (2) Standard The Mortgagee
      may use Foreign Income as Effective Income if the Borrower has received this
      income for the previous two years and it is reasonably likely to continue. (3)
      Required Documentation The Mortgagee must obtain complete individual Tax Returns
      showing Foreign Income for the most recent two years, including all schedules.
      For all Foreign Income, the Mortgagee must satisfy the requirements listed based
      on source and type of income as outlined in Income Requirements (TOTAL). If
      the Foreign Income documents are not received in English, the Mortgagee must
      provide a complete and accurate translation for each document and convert foreign
      currency to U.S. dollars. (4) Calculation of Effective Income The Mortgagee
      must analyze the Borrower’s Tax Returns to determine gross Foreign Income. The
      Mortgagee must average the Foreign Income over the previous two years to calculate
      of Effective Income.'
  judgment: false
