My last category of adjustments to get from taxable income to recurring cashflow is really just a time-saver. I call it nondocumented income.
Let’s say you already have your borrower qualified easily (in these economic times that sounds great)!
And on a personal loan or a guarantor analysis, they have alimony. You don’t need it to qualify and you don’t want to bother your borrower to provide a divorce decree when, well, you don’t need it to qualify.
So consider which income sources you don’t need. Then consider leaving that income out of cashflow.
How do you decide?
- Do your guidelines allow you to leave income off that you don’t need to qualify the borrower? (Consumer/Mortgage: probably. Commercial: Maybe)
- Is this one of a series of loans in which for later planned ones you probably will need it?
If you decide not to use it, at least make a list in a visible place of income sources you did not include but could be considered if needed. Here is the short list of possibles:
- Alimony/child support received
- Contract/Note receivable
- Capital Gains