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Hi all, I'm currently applying for a loan and have already gone through pre-approval, appraisal and home inspection. My loan officer is telling me that my file is good to go, DTI ratio is good, credit score above 740, been with the same company with progressively higher salary for the past 10 years. However, she is now telling me that the income reported by my employer on the verification of employment form is different from what is reported on my W2 box 1, and this is a big problem. I went with this lender because I already had Wells Fargo drop my application because of the same issue.
I looked into the issue further and found that my employer is reporting gross income, which includes W2 box 1 and all of my pre-tax deductions (401k, medical, dental, vision premium, etc). My employer also deducts vacation time, and certain holiday pay from the base salary and reports it as a separate line item, so the base salary also doesn't exactly match what is listed on my W2. I wrote a letter of explanation to my lender on how the gross income and base salary (salary + vacation + holiday) is calculated and how they can come to the exact same amount with the numbers on my W2.
I'm just a little perplexed, because this seems so simple and common, but yet, I have 2 lenders now asking questions about this. Do all lenders use box 1 of the W2 as total income earned? Box 12 only reports my 401k contributions and do not include my health care premiums.
In any case, my loan officer says that even with just box 1 income, I'm still okay DTI-wise. I'm one week away from closing escrow, and will be charged 350.00/day of delay on this new construction home, and I'm really worried that this will cause my loan to be denied.
Really stressed right now, and would like to hear if anyone has experience with this situation and what is the likelihood of this really being a problem?
What gross income was reported to the IRS? Your lender can pull the copy of the employer reported (gross, not taxable) W2 and that is what will be used. We can't have a discussion what is allowable in the reported earnings.......only what was reported. If the reported income is calculated incorrect (this isn't rocket science), the employer needs to acknowledge that it is incorrect and then you need to find yourself a Fannie Mae Direct lender. If your lender is using taxable income in their calculations, they are idiots.
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