Non-reimbursed Business Expenses for a Kentucky Mortgage LoanWhen a borrower has unreimbursed business expenses, such as classroom supplies, uniforms, meals, gasoline, automobile insurance, and/or automobile taxes, the underwriter must determine the borrower’s recurring monthly debt obligation for such expenses by developing a 24-month average of expenses, using information from the borrower’s IRS Form 1040 including all schedules (Schedule A & IRS Form 2106) and net out any automobile depreciation claimed on IRS Form 2106.
Consequently, when calculating the total debt-to-income ratio, the 24-month average for non-reimbursed expenses should be subtracted from the borrower’s stable monthly income, unless such expenses are automobile lease payments or automobile loan payments, in which case they are to be considered part of the borrower’s recurring monthly debt obligations. If there is not a 24-month history of such expenses, the underwriter should develop an annualized monthly average for the expenses and add this calculated amount to the borrower’s monthly debt obligations
Senior Loan Officer
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