“I just got a new job and my employer is paying me $500 per month for a car allowance as part of my compensation package with them.
“My wife and I are trying to buy our first home and want to know if we can use the $500 toward our mortgage payment as we won’t need the full amount for a car.”
We’ve been receiving more of these same inquiries lately. In general, income from automobile allowances or expense account payments, but not reimbursements, may be used if the income has been received for at least two years and is properly documented.
This type of information should be made available to your lender by way of your filed IRS Tax Form 2106 and supported through an analysis of this form by your lender as well. Your lender will require acceptable documentation to confirm a two-year time frame of receiving the allowance via either a written verification of employment or your W-2s covering the last two years of your employment history.
Furthermore, your lender will need a recent year-to-date pay stub for at least 30 days of employment at your new job.
If the allowance is not reflected on the verification-of-employment form completed by your employer, then additional documentation must be obtained from your employer to support the allowance.
Collectively, any documentation provided should clearly specify the payment amount, duration and frequency of the allowance plus the likelihood of it continuing for the next three years. If the allowance does not show on your W-2s or tax returns, it cannot be considered income used toward your home loan qualification.
“A client of mine was looking at refinancing a property they inherited but it was on two different lots. Is this going to be a problem for them?”
Usually these types of properties are required to have only one lot and one tax parcel number. However, multiple lots or parcels are eligible for standard financing programs if they meet certain criteria.
For example, the lots or parcels need to be adjoining and zoned legal residential. In addition, only one lot or parcel may have a dwelling unit on it and the adjoining lot or parcel should have no improvements on it. Although in some cases, limited nonresidential improvements such as a garage is allowed.
More importantly, the multiple parcels should appear on one legal property description and can’t be on two separate preliminary title reports.
There are also a few exceptions for non-adjoining lots to be eligible for standard financing such as parcels that otherwise would be adjoined, but are divided by a road.
This might be acceptable if the parcel without a residence is a non-buildable lot, like a waterfront property where the parcel without the residence provides access to the water.
In all instances, evidence that the non-adjoining lot is not buildable has to be carefully presented to your client’s lender and the mortgage must be a first lien on each lot or parcel, too.