Some articles clearly hit a nerve, and this one has been my most-read article to date. So, as summer winds down and we head into Labor Day and the fall homebuying season, I’m bringing it back for anyone who missed it the first time around.

If you’re thinking about buying a home, understanding how a lender calculates your qualifying income is one of the most important pieces of the mortgage puzzle. And as you’ll see, the number your lender uses may not be the number you have in your head.

Let’s revisit the basics and take another look at how mortgage lenders calculate income.

Over the past few weeks, we’ve talked about credit, liabilities, debt-to-income, and assets.

Now, we’re moving into one of the most important, and often confusing, parts of getting a mortgage: income calculation.

This topic is big, so I’m breaking it into several articles. We’ll cover all types of income—full-time, part-time, self-employed, gig work, and passive income—and what underwriters look for with each one. My goal is to explain how lenders determine qualifying income in a way that makes sense, without the jargon.

Let’s start with the most common: a full-time job.

Gross vs. Net Income for a Mortgage

When you apply for a home loan, the lender starts with gross income (the amount you earn before taxes), Social Security, insurance, retirement contributions, or other deductions.

Your qualifying mortgage income is based on this gross amount, calculated as a monthly figure.

Salary Income: The Easiest to Calculate

If you’re on a salary, your pay stays the same every payday. You might be paid weekly, every two weeks, twice a month, or monthly.

Here’s how to figure out your monthly gross income for mortgage purposes:

Annual salary ÷ 12

Example: $85,000 ÷ 12 = $7,083.33 per month

Paid every two weeks (bi-weekly): gross paycheck × 26 ÷ 12

Example: $1,000 × 26 ÷ 12 = $2,166.67 per month

Paid twice a month (semi-monthly): gross paycheck × 24 ÷ 12

Example: $1,000 × 24 ÷ 12 = $2,000 per month

Paid monthly: use your gross monthly pay—no calculation needed.

Salary math is simple. Hourly pay? That’s where it gets tricky.

Hourly Pay: Fluctuating Income and Averages

If you’re paid hourly, your weekly hours might not be the same, 38 one week, 40 the next, maybe 42 with overtime. This is called fluctuating income, and lenders must average it to figure out your qualifying income.

Example:

Gary earns $32 an hour and works 40 hours a week.

Weekly math:

$32 × 40 = $1,280 per week

$1,280 × 52 weeks = $66,560 annually

$66,560 ÷ 12 months = $5,546.67 per month

Check against year-to-date (YTD) income:

If Gary’s YTD pay is $33,280.02 as of June 30:

$33,280.02 ÷ 6 months = $5,546.67 per month

If the numbers match, that’s the income used. If not, the underwriter will ask why. Maybe it’s a raise, fewer hours, or normal scheduling differences.

When Lenders Average Your Income

If hours vary, the lender might average your income over the last 12 to 24 months.

Example:

Gary earned $64,300 in 2024 and $30,500 in the first half of 2025:

$64,300 + $30,500 = $94,800 over 18 months

$94,800 ÷ 18 = $5,266.67 per month

That $280 difference from the earlier figure could impact how much he qualifies to borrow.

Overtime and Bonus Income for a Mortgage

If you get overtime or bonuses, most lenders want to see at least two years of history before they’ll count this income toward your qualifying amount. Lenders calculate bonus income the same way they calculate overtime.

Example:

2023: $2,500 overtime

2024: $2,600 overtime

2025 YTD (through June): $1,500 overtime

Step 1: Add them together:

$2,500 + $2,600 + $1,500 = $6,600 over 30 months

$6,600 ÷ 30 = $220 per month in overtime income

Step 2: Check if it’s consistent this year:

$1,500 ÷ 6 months = $250 per month. Yes, consistent.

Some lenders are more conservative and average only the past two full years, or even the past 12 months, which could lower the qualifying amount.

Why Your Qualifying Income Can Vary by Lender

Mortgage income calculations aren’t always identical from lender to lender. Loan program rules can differ, and guidelines change over time.

The best way to avoid surprises is to give your lender all your income documents upfront (paystubs, W-2s, and any other proof of earnings) and let them do the math.

If the number seems off, ask them to walk you through it. You have every right to know how they got there.

Final Thoughts and an Invitation

When you apply for a mortgage, lenders will add up all your eligible income sources to find your total qualifying income. This number helps you determine how much house you can afford, but keep in mind that it may not match what’s shown on your pay stub or tax return.

Figuring out your qualifying income for a home loan can be frustrating, even for underwriters. But it’s one of the most essential steps in the mortgage process.

Have you tried calculating your income and found the lender’s number was different? Higher? Lower?

Drop me a message and let’s talk it through. I’m here to explain the rules, run the numbers, and help you feel confident before you take the next step toward buying a home.

If you’ve ever checked your Credit Karma score and wondered why it didn’t match what your lender pulled, this Summer Encore is a must-listen. John Mackey and I take a closer look at how Credit Karma really works, why VantageScore and FICO scores can be dramatically different, and how “free” credit monitoring platforms make their money.

Whether you’re planning to buy a home, improve your credit score, or simply want to understand how credit scoring works, this episode is packed with information every consumer should know.

If you missed it the first time around, now’s your chance to catch up before we return with all-new episodes this fall.

We’ll be back with brand-new episodes after our Summer Encore series wraps up. Until then, we’re revisiting some of our most valuable conversations to help you become a more informed consumer.

Thanks for listening, and we’ll see you again soon.

Give Me Credit Podcast is available on Substack, Apple Podcasts, and Spotify.

Give Me Credit - Apple Podcasts

Give Me Credit - Spotify

Hi everyone,

Let’s talk about that “free” credit score you check at 10:00 p.m. when you cannot sleep.

In Give Me Credit #27, John Mackey and I dig into Credit Karma and its business model. We break down how it operates as a marketing funnel, not a financial education platform.

Yes, you get a free credit score.

But in exchange, your behavior becomes data. Your clicks become leads. Your curiosity becomes commission.

Subscribe now

That’s not education.

That’s acquisition.

We break down the affiliate engine, the gamified monitoring, the monetized anxiety, and ask the only question that matters:

If a platform profits when you borrow… is it built to teach you not to?

Listen to Give Me Credit #27 now and get clarity on the game you are a pawn in.

Share

You can also follow the J.S. Whaldo Travel and Lifestyle Blog at www.JSWhaldo.com

Those are important questions, but they aren’t the only ones a prospective home buyer needs to ask.

One of the most important questions is often overlooked: Can you afford to own the home after you buy it?

Qualifying for a mortgage is different from being financially comfortable with the responsibilities that come with owning a home. A lender looks at your income, debts, credit, assets, and other factors to determine whether you meet the requirements for a loan. That approval does not mean the resulting payment will necessarily feel comfortable in your everyday life.

And your principal and interest payment is only one part of the cost of owning a home.

What Does a Mortgage Payment Really Include?

When you are shopping for a home, it is easy to focus on the principal and interest payment. You find a house you like, plug the purchase price into a mortgage calculator, and start thinking about whether that monthly payment fits your budget.

But there is more to your housing payment than principal and interest.

You will have property taxes and homeowners insurance. If the property is part of a homeowners association, you’ll have HOA dues. Depending on where you live and the property you are buying, you may also need flood insurance or other coverage.

And these costs aren’t fixed forever. Property taxes change. Homeowners insurance premiums increase. HOA dues go up, and an HOA can sometimes levy a special assessment for a major expense.

I’ve covered most of these costs in prior articles because they are important to understanding a mortgage payment. What we haven’t talked about as much is everything that doesn’t show up on a mortgage calculator.

Because the mortgage company isn’t going to send someone over every few months to change your air filter, clean your gutters, or trim the tree that has started growing toward your roof. Don’t even get me started on termites and other pests that need to be dealt with.

That’s your job now.

The Hidden Costs of Homeownership

This is one of the biggest differences between renting and owning.

When something breaks in a rental, you generally call the landlord or property manager. When you own the house, you are the person responsible for figuring out what happened, who needs to fix it, and how you are going to pay for it.

The air conditioning stops working in the middle of summer? Your problem.

The water heater gives up? Your problem.

A pipe starts leaking? Your problem.

A tree needs to be trimmed because its branches are getting too close to the roof? Your problem.

The gutters need cleaning, an appliance dies, or the garage door stops working? You get the idea.

Not every home repair is an emergency, and not every homeowner will experience the same problems. That’s where regular maintenance comes in. Air filters need to be changed. Gutters need to be cleaned. Trees need to be trimmed before they become a threat to the house. HVAC systems need maintenance. Roofs eventually need attention. Appliances don’t last forever.

Even something as simple as re-keying the locks when you move in is worth considering. You may not realize how many previous owners, tenants, contractors, or others have had copies of those keys.

A home warranty can provide some peace of mind during the first year of homeownership. Depending on the plan, a home warranty may help cover the repair or replacement of certain major systems and appliances when they fail. Some sellers even offer a home warranty as part of the transaction.

But a home warranty isn’t a magic shield against every home repair. Coverage varies by contract; exclusions and limits apply, and you typically pay a service fee when you make a claim. It also doesn’t cover the regular maintenance that keeps a house in good condition.

It can be helpful. It just shouldn’t be mistaken for a substitute for having money available when you own a home.

Your Other Monthly Expenses Still Matter

This is where I think prospective home buyers need to take a much broader look at affordability.

You still have electricity, water, gas, internet, and a phone bill. You still have to put gas in the car and maintain the car. You still need groceries. You may have children who need daycare or have school expenses. You may have student loans, credit cards, personal loans, or other debts.

Those expenses don’t disappear because you bought a house.

Neither do the unexpected ones.

Your car can break down. Your child can need something you didn’t budget for. You can have an unexpected medical expense. Your income can change.

That’s why a home-buying budget needs to include more than the home’s cost. You need to look at the life you will continue to live once you own it.

A house that consumes so much of your income that there is nothing left for everything else may technically be affordable according to a lender’s guidelines, but that doesn’t necessarily make it a comfortable or sustainable choice.

Share

Why You Need an Emergency Fund Before Buying a Home

I understand the temptation to use every dollar you have to get into the house.

You’ve saved for the down payment. You have closing costs. You have moving expenses. You may need furniture or other things for the new house. After all of that, you may look at whatever is left in your savings account and think, “Why wouldn’t I put that toward the house?”

Because cash has value too.

An emergency fund is not money you failed to use. It is money you intentionally kept available for the things you cannot predict.

And eventually, something will happen, because life happens.

The problem isn’t necessarily the emergency. The problem is what happens when you don’t have the cash to handle it.

That’s when a manageable expense can become debt. A credit card. Buy Now, Pay Later. A personal loan. And, in the worst situations, a payday loan or another expensive form of borrowing.

Suddenly, an expense you could have covered with savings becomes another monthly payment adding to the stress of daily life.

That’s not a good way to start homeownership.

Subscribe now

When Renting Makes More Financial Sense

We don’t talk about this nearly enough.

Enormous pressure exists to become a homeowner. You hear that renting is throwing money away. You hear that you need to stop paying someone else’s mortgage. You hear that if you don’t buy now, you may never be able to afford a house.

I understand why people want to buy. Homeownership can be wonderful. You can build equity, have more control over your living space, and make changes without asking a landlord for permission.

But homeownership isn’t a race.

And renting isn’t a financial failure.

Renting has legitimate financial benefits, especially when you aren’t yet in a position to comfortably handle the responsibilities of owning a home. When you rent, the landlord generally handles major property repairs and maintenance. If the air conditioner dies, the roof leaks, or the plumbing needs major work, you usually aren’t the person responsible for coming up with thousands of dollars to replace it.

You still need insurance, of course. Renters insurance protects your personal belongings and provides liability coverage, while the landlord’s property insurance generally covers the building itself. Those are very different responsibilities from carrying homeowners insurance on a property you own.

Renting may simply mean paying for a place to live while you build the financial foundation you need to buy eventually.

There is nothing wrong with that.

How Much House Can You Really Afford?

This is where I think the question needs to change.

Instead of asking only, “How much can I qualify for?” ask yourself, “How much can I comfortably afford while still living my life?”

Those can be two very different numbers.

I spent decades working in mortgage underwriting, so I understand why qualifying for the loan matters. Rules and guidelines exist for a reason, and lenders have to determine whether a borrower meets those requirements.

But mortgage approval doesn’t guarantee homeownership will be financially comfortable.

The lender knows your income, your debts, your credit history, and the assets you are using to close. The lender doesn’t know that your car has been making a strange noise for six months. The lender doesn’t know your child will need braces. The lender doesn’t know that your department is about to be eliminated at your job.

Those are real-life financial considerations, and they matter.

Buying a Home You Can Afford to Keep

A mortgage approval tells you that you can qualify for the loan. It doesn’t tell you whether now is the right time to take on the responsibility of owning a home.

Sometimes the smartest financial decision isn’t finding a way to make the numbers work. It’s recognizing that they don’t work comfortably yet.

Waiting doesn’t mean you’ve failed. It means you’re giving yourself time to build savings, pay down debt, strengthen your finances, and put yourself in a better position to enjoy homeownership when the time is right.

Because the goal isn’t simply to get the keys.

The goal is to buy a home you can afford to keep.

Ethics professor Neil Tift joined us to discuss something most people never think about until it affects them: the ethics behind algorithmic credit systems.

As more financial decisions are made by data and predictive models, where does fairness fit in? We explore how automated systems can overlook the human stories behind financial hardship and why ethics should still have a seat at the table.

If you missed this episode the first time, or if you’ve ever wondered who really decides financial opportunity, this is one worth revisiting.

We’ll be back with brand-new episodes after our Summer Encore series wraps up. Until then, we’re revisiting some of our most valuable conversations to help you become a more informed consumer.

Thanks for listening, and we’ll see you again soon.

Give Me Credit Podcast is available on Substack, Apple Podcasts, and Spotify.

Give Me Credit - Apple Podcasts

Give Me Credit - Spotify

What happens when credit systems stop seeing people and start seeing patterns?

In this latest episode of Give Me Credit, John Mackey and I welcome ethics professor Neil Tift back to the podcast for a deeper discussion about algorithmic credit systems and the growing power imbalance inside modern lending.

We talk about:

• How predictive data can override human context
• Why financial hardship often gets treated like personal failure
• The ethical responsibility of lenders and system designers
• Capitalism with a conscience
• What happens when algorithms quietly manage opportunity

Subscribe now

This conversation goes beyond credit scores. It touches on fairness, accountability, and the real lives affected by automated decision-making.

It may be one of our most important conversations yet.

Listen now and tell us your thoughts.

Leave a comment

In this episode, financial expert Gerry Weston shares a cautionary story that every borrower should hear before signing up with a debt relief company. We discuss why many creditors would rather work directly with you than through a third-party debt settlement company, and how the wrong decision can lead to lawsuits, garnishments, and lasting credit damage.

If you missed this episode the first time around, now is the perfect opportunity to catch up. And if you heard it before, it’s a timely reminder that the best financial decisions often start with a simple conversation.

We’ll be back with brand-new episodes after our Summer Encore series wraps up. Until then, we’re revisiting some of our most valuable conversations to help you become a more informed consumer.

Thanks for listening, and we’ll see you again soon.

Give Me Credit Podcast is available on Substack, Apple Podcasts, and Spotify.

Give Me Credit - Apple Podcasts

Give Me Credit - Spotify

This week on Give Me Credit, we are sharing Part One of a powerful two-part conversation with financial expert Gerry Weston.

Debt relief companies promise fast solutions and peace of mind. What they do not advertise is how often those promises fall apart, leaving borrowers exposed to lawsuits, garnishments, and severe credit damage.

Subscribe now

In this episode, Gerry walks through a real case where a debt relief middleman failed to act, while the creditor was willing to work directly with the borrower all along. We talk about why fear keeps people from calling their lender, how that fear is exploited for profit, and why direct communication is almost always the safer path.

If you or someone you love is dealing with debt stress, this episode is essential listening.

Next week, in Part Two, we shift from warning to action and talk about what creditors can actually offer when you reach out.

Listen now, and then come back next week with better options and real leverage.

Warmly,
J.S. Whaldo
Give Me Credit

Share

This week we’re revisiting our conversation with real estate educator Michael Brennan. We discuss what really happens behind the scenes of a real estate transaction, why education and ethics matter, and the responsibilities real estate professionals carry to help protect consumers.

Whether you’re buying, selling, or simply curious about how the process works, this episode is packed with practical insights that are just as relevant today.

We’ll be back with brand-new episodes after our Summer Encore series wraps up. Until then, we’re revisiting some of our most valuable conversations to help you become a more informed consumer.

Thanks for listening, and we’ll see you again soon.

Give Me Credit Podcast is available on Substack, Apple Podcasts, and Spotify.

Give Me Credit - Apple Podcasts

Give Me Credit - Spotify

This week on Give Me Credit, John Mackey and I sit down with real estate educator Michael Brennan, of The RealtySchool.com, for a conversation that goes far beyond passing a licensing exam.

We explore what real estate professionals are actually responsible for during a transaction, including contracts, disclosures, negotiations, legal liability, ethics, and protecting consumers from costly mistakes.

Michael also breaks down the difference between simply holding a license and becoming a REALTOR®, including the professional standards and continuing education requirements that shape the industry.

Subscribe now

One of the biggest takeaways from this discussion is that buying or selling a home is not just a sales transaction. It is a major financial and legal event that can impact families for decades. The professionals involved carry real responsibility, and education matters more than most consumers realize.

If you’ve ever wondered what happens behind the scenes in a real estate transaction or why experienced professionals matter, this is an episode worth hearing.

Listen now on Give Me Credit.

Share

Surprisingly, it’s one that many borrowers never see coming.

Leasing a vehicle.

I’ve had more than one borrower say something like, “It’s only a lease. I don’t even own the car.”

From an underwriting standpoint, that doesn’t matter.

What matters is that you have a monthly payment you’re legally obligated to make, and that payment becomes part of your DTI (debt-to-income ratio).

Why Car Lease Payments Count Toward Your DTI

This is one of those areas where every major mortgage program agrees.

Whether you’re applying for a Conventional, FHA, VA, USDA, or Freddie Mac loan, your lease payment is generally treated as a recurring monthly debt.

This is because, in the overwhelming majority of cases, when your lease expires, you probably aren’t going to start walking to work.

You’ll likely lease another vehicle, buy the one you’re driving, or finance a different car. In other words, the payment usually doesn’t disappear. It simply changes form.

What If My Lease Ends Next Month?

This is probably the biggest misconception I hear.

Many borrowers assume that if they only have a month or two left on their lease, the payment won’t count. In almost every case, that’s not how mortgage underwriting works.

Unlike many installment loans that may be excluded when they have less than ten payments remaining, lease payments are generally included regardless of how close they are to ending.

The reasoning is simple. Just as stated above, the lender assumes you’ll still need reliable transportation after the lease expires.

If your lease is close to expiring during the mortgage process, your lender may ask additional questions. They may want to know whether you plan to return the vehicle, lease another one, or purchase the current vehicle. Any of these situations could change your monthly obligations and, ultimately, your mortgage qualification. You’ll likely need to document both the new payment and the source of the funds used for the purchase or the current lease buy-out.

How Different Mortgage Loan Programs Handle Car Leases

Fannie Mae (FNMA)

Fannie Mae requires lease payments to be included in your monthly debt obligations regardless of how many months remain on the lease.

The reasoning is straightforward. When one lease ends, most borrowers either lease another vehicle, purchase the vehicle they’re driving, or finance a replacement vehicle. Because the obligation is expected to continue in one form or another, the payment remains part of your qualifying ratios.

FHA/VA

FHA and VA follow essentially the same philosophy.

Lease payments must be included in your recurring monthly obligations regardless of the maturity date.

The reasoning is the same. FHA and VA recognize that a leased vehicle is generally a necessary expense, so the monthly obligation is included even if the lease is nearly complete.

USDA

USDA follows the same general rule.

Lease payments are always included in your monthly debt calculations, even if only one payment remains.

USDA also makes it clear that receiving an employer vehicle allowance doesn’t automatically eliminate the debt from your application. The lease payment must still be considered during the underwriting process.

Subscribe now

Freddie Mac (FHLMC)

Freddie Mac also requires monthly lease payments to be included in your debt-to-income ratio regardless of the number of payments remaining.

There is one notable exception.

If an automobile lease is completely paid off before closing, the monthly payment may be excluded. However, the lender must document where the payoff funds came from, and those funds must come from an acceptable source.

Share

Does an Employer Car Allowance Offset a Lease Payment?

This is another question I hear fairly often.

Some employers provide a monthly vehicle allowance or reimbursement.

Unfortunately, that doesn’t automatically offset your lease payment for mortgage qualification.

The lease itself is still a legal financial obligation, and the payment must be evaluated under the applicable loan guidelines. An employer-provided auto allowance may help you qualify, but every investor handles these allowances differently. In most cases, you’ll need to demonstrate that the allowance has been received consistently over time, and your lender will require documentation to verify both the history and the amount before it can be considered during the underwriting process.

What If My Business Makes the Lease Payments?

This is fairly common with auto leases. In some cases, the lease obligation may qualify as a contingent liability, allowing the monthly payment to be excluded from your DTI if specific documentation requirements are met. Generally, you’ll need to show that the lease payments have been made consistently by the business for the past 12 months, not from a personal account or an account used to pay your day-to-day living expenses (see my prior article about separating business and personal accounts). When properly documented, this can be an effective way to keep the lease payment from being included in your monthly debt obligations for qualifying purposes.

Before You Sign That Lease…

If buying a home is on your radar over the next year, talk with your loan officer before signing a new vehicle lease.

A monthly payment that seems manageable on its own can have a bigger impact on your mortgage qualification than many people expect.

That doesn’t mean leasing is a bad idea. It simply means you should understand how that decision fits into the bigger financial picture before you sign the paperwork.

Final Thoughts

One thing I learned during my years as an underwriter is that mortgage guidelines are designed to predict your ability to handle future payments, not just today’s bills.

That’s why lease payments receive special treatment.

The takeaway is simple. Just because a lease is almost over doesn’t mean it won’t affect your mortgage approval. Understanding how underwriters look at lease payments before you sign that next vehicle contract can save you from an unpleasant surprise when you’re ready to buy a home.

Leave a comment

In our first episode with FCRA attorney Jacob Hippensteel, we pull back the curtain on the Fair Credit Reporting Act and explain what happens when credit bureaus, lenders, and data furnishers get it wrong.

Your credit report isn’t just a number that lenders look at.

It’s a federally regulated consumer report, and you have legal rights when the information it contains is inaccurate.

If you missed it the first time around, now is the perfect opportunity to catch up.

We’ll be back with brand-new episodes after our Summer Encore series wraps up. Until then, we’re revisiting some of our most valuable conversations to help you become a more informed consumer.

Thanks for listening, and we’ll see you again soon.

Give Me Credit Podcast is available on Substack, Apple Podcasts, and Spotify.

Give Me Credit - Apple Podcasts

Give Me Credit - Spotify

Hi,

This week on Give Me Credit, we brought in serious firepower.

John Mackey and I sat down with FCRA attorney Jacob Hippensteel, one of the nation’s leading litigators in credit reporting and consumer protection law, and founder of Hippensteel Law Firm, to break down one of the most powerful and misunderstood consumer protection laws in America: the Fair Credit Reporting Act.

Your credit report is not just a score generator.

It is a federally regulated legal document.

And you have enforceable rights under the FCRA.

Jacob litigates FCRA cases nationwide against credit bureaus, banks, and data furnishers on behalf of consumers dealing with inaccurate credit reporting. His firm handles a high volume of credit reporting disputes and works closely with credit repair companies to connect consumers with real legal options when the dispute process falls short.

Subscribe now

In this episode, we talk about:

• What actually happens after you send a dispute letter
• Why systemic credit reporting errors are more common than most people think
• How the E-Oscar system works behind the scenes
• Why documentation, precision, and strategy matter more than emotion
• The truth behind so-called credit repair loopholes

If you have ever found errors on your credit report, felt ignored by a credit bureau, or worried about your credit before applying for a mortgage, this conversation matters.

Share

Under federal law, you have rights.

The real question is whether you know how to use them.

Listen now and learn how to protect yourself.

Below is Jacob’s contact information and firm details if you need to explore your legal options.

With clarity and purpose,
J.S. Whaldo

Jacob Hippensteel is an attorney and founder of Hippensteel Law Firm, where he litigates FCRA cases nationwide against credit bureaus, banks, and furnishers on behalf of consumers dealing with inaccurate credit reporting. His practice handles a high volume of credit reporting disputes, and he works closely with credit repair companies as referral partners to connect consumers with legal options when the dispute process isn’t enough. Jacob brings a systems-driven approach to FCRA litigation, building processes that enable him to handle a large caseload while maintaining high-quality cases.

Hippensteel Law Firm
Direct: 480-319-9091
Website: www.hippensteellaw.com

You can also follow the J.S. Whaldo Travel and Lifestyle Blog at www.JSWhaldo.com

This encore episode features attorney Jacob Hippensteel, who joins John Mackey and JS Whaldo to break down what is really happening inside the credit reporting system and why so many disputes seem to go nowhere.

We dig into mixed files, identity theft, automated credit bureau processes, and the uncomfortable truth that the system is built to serve lenders first.

We’ll be back with all-new episodes when Season 2 returns on September 8, 2026. Until then, enjoy this rewind and catch the insight you might have missed the first time around.

Give Me Credit Podcast is available on Substack, Apple Podcasts, and Spotify.

Give Me Credit - Apple Podcasts

Give Me Credit - Spotify

If you think your credit report exists to help you, this episode is going to change that.

In this conversation, John and I sit down again with consumer attorney Jacob Hippensteel to take a deeper look at what is really happening behind the scenes of the credit reporting system.

And here is the uncomfortable truth.

You are not the customer.

Subscribe now

The credit bureaus are not built to serve you. They are built to serve lenders. That one shift in perspective explains why so many disputes go nowhere, why errors remain on reports for years, and why consumers feel stuck and ignored.

Jacob walks us through what he sees every day in litigation. Mixed files. Identity theft. Inaccurate reporting that follows people for years. These are not rare situations. They are more common than most people realize.

We also talk about why the system operates like a machine. Fast, automated, and focused on cost rather than accuracy. That is why your carefully written dispute letter often gets little more than a surface-level review.

And when that happens, the consequences are real.

Higher interest rates

Loan denials

Lost job opportunities

This is not just about numbers on a report. This is about your financial life.

Share

We also get into what you should be doing instead. Where to actually pull your credit reports. Why relying on third-party apps can give you a false sense of security. And when it is time to stop trying to fix it yourself and bring in legal help.

If you have ever felt that your credit situation doesn't make sense, this episode will connect the dots.

Listen now and see the system for what it really is.

And then tell me this

Have you ever filed a dispute that felt like it disappeared into a black hole?

Leave a comment

Jacob Hippensteel is an attorney and founder of Hippensteel Law Firm, where he litigates FCRA cases nationwide against credit bureaus, banks, and furnishers on behalf of consumers dealing with inaccurate credit reporting. His practice handles a high volume of credit reporting disputes, and he works closely with credit repair companies as referral partners to connect consumers with legal options when the dispute process isn’t enough. Jacob brings a systems-driven approach to FCRA litigation, building processes that enable him to handle a large caseload while maintaining high-quality cases.

Hippensteel Law Firm
Direct: 480-319-9091
Website: www.hippensteellaw.com

Today, I want to take a deeper dive into one simple habit that can make a big difference if you’re self-employed or own a small business.

Keep your business and personal finances separate.

It sounds like basic bookkeeping advice, but it can have a real impact on your mortgage application.

Underwriters Need a Clear Financial Picture

Over my 30-plus years as a mortgage underwriter, I reviewed countless loan files where every dollar flowed through one personal checking account. Business income. Client payments. Household bills. Groceries. Business expenses. Vacations. Everything.

From an underwriting standpoint, that creates unnecessary work.

Our job is to determine what income is available to qualify you for a mortgage. When business and personal transactions are mixed together, it takes much longer to identify deposits, verify income, and determine which expenses belong to the business versus your household.

That usually means more documentation.

More questions.

More conditions.

Sometimes it even delays your closing.

The cleaner your financial records are, the smoother your mortgage process is likely to be.

How Separate Bank Accounts Make Mortgage Underwriting Easier

A dedicated checking account paints a much clearer financial picture. Business income goes into one account. Business expenses come out of that account. Your personal account is reserved for your household finances. It’s easier for you, easier for your accountant, and much easier for the underwriter reviewing your loan.

How Business-Paid Debts Can Affect Your Debt-to-Income Ratio

There is another reason this matters that many borrowers don’t discover until they’re already in underwriting.

Some self-employed borrowers have debts, such as an auto loan, that are paid entirely by the business. Under many mortgage guidelines, those monthly payments may be excluded from your personal debt-to-income ratio, but only if you can document that the business has been making the payments for at least the past 12 months.

Think about that for a minute.

If the payments are coming from your personal checking account, there is no clear paper trail showing that the business is paying the debt. As far as the documentation is concerned, it appears you are making the payment personally. Without the required evidence, the lender may have to include that monthly payment in your debt-to-income ratio, which could reduce the amount you qualify to borrow.

A separate business account creates the documentation lenders are looking for. It provides a clean history showing exactly where the payments originated and can help avoid unnecessary questions during underwriting.

Share

Simple Steps to Prepare for a Mortgage Before You Apply

If buying a home is even a possibility in the next year or two, now is the perfect time to get organized. Open a dedicated business checking account if you don’t already have one. Deposit your business income there. Pay your business expenses from there. Transfer your owner’s draw or paycheck into your personal account and use that account for your everyday household expenses.

It’s one of the simplest financial habits you can adopt, and it pays dividends well beyond mortgage financing.

As I’ve said before, underwriting isn’t about making things difficult. It’s about documenting the story your finances tell. When your business and personal finances each have their own story, that story is much easier to understand.

Have a question about self-employment, underwriting, or qualifying for a mortgage? Leave it in the comments. If you’re wondering about it, chances are someone else is too.

Leave a comment

We are currently in our Summer Encore series, sharing standout episodes from Season 1 while we take a short break. New Season 2 episodes return on 9/8/26 with fresh conversations and deeper dives into credit, debt, and mortgage lending insights.

Give Me Credit Podcast is available on Substack, Apple Podcasts, and Spotify.

Give Me Credit - Apple Podcasts

Give Me Credit - Spotify

Today, we are sharing a real debt collection call that John recorded on his business line, and it is a ride. This collector barrels in with confidence, armed with the wrong Social Security number, the wrong address, and a lawsuit threat set in Honolulu… while John is sitting in Minneapolis. From the first minute, you hear classic debt-collection red flags, legal misrepresentations, and pressure tactics designed to scare consumers into paying.

Share

John stays calm and steady, which is precisely how to handle a collection call that feels off. As you listen, you will catch the manipulation, the shifting script, the bogus urgency, and the not-so-subtle intimidation that violates basic consumer protection principles. This call is a sharp reminder of why knowing your rights matters in credit and debt collection. It also shows how quickly a collector’s story falls apart when you ask simple questions.

After the audio, we break everything down so consumers can protect themselves from outdated accounts, statute-of-limitations issues, and aggressive collection practices. It is short, powerful, and packed with real-life lessons.

Settle in. This one runs longer than usual, but every second is worth it.

That is the hard truth attorney David Cox breaks down in this Summer Encore episode of GMC #34.

Even if a divorce decree assigns a debt to your ex, lenders are not part of that agreement. If your name is on the account, you are still responsible. And if payments are missed, your credit takes the hit anyway.

We talk through what actually happens with joint debt after divorce and how people can protect themselves before signing settlement agreements.

This is one of those episodes that can save someone years of credit damage.

Listen now. Season 2 returns September 8, 2026.

Give Me Credit Podcast is available on Substack, Apple Podcasts, and Spotify.

Give Me Credit - Apple Podcasts

Give Me Credit - Spotify

In this episode, we sit down with divorce attorney David Cox to unpack one of the most misunderstood financial traps in divorce.

Here is the hard truth. A divorce decree may assign a debt to one spouse, but it does not rewrite the original contract with the creditor. If your name is on that loan, you are still on the hook. Period.

We walk through what really happens when an ex-spouse misses payments on a joint account, a credit card, or even a mortgage. Late payments still hit your credit. Collections can still come after you. Your credit score can take the fall for someone else’s mistake.

Subscribe now

Why? Because lenders are not part of your divorce. They never agreed to let you off the hook.

This conversation breaks down the gap between what the family court orders and how the credit and lending system actually works. It also highlights practical ways to protect yourself during settlement, including forced asset sales, refinancing requirements, and clear exit strategies from joint debt.

Share

If you think divorce automatically separates your finances, this episode will change your mind fast.

Leave a comment

GUEST:

David M. Cox, Attorney at Law
Two Rivers Law P.A.

763-575-7911
David@TwoRiversLawOffice.com

www.TwoRiversLawOffice.com

9040 Quaday Ave., NE Suite 200, Otsego, MN 55330

The reality is that life doesn’t wait for lower interest rates. Families grow, careers take people to new cities, empty nesters downsize, and first-time buyers are ready to stop renting and start building equity. If purchasing a home is the right move for you, this is a good time to revisit one of the most overlooked tools available to homebuyers: Down Payment Assistance programs.

Throughout my 30-plus years as a mortgage underwriter, I’ve heard one concern more than almost any other: “I’d buy a home if I could just save for the down payment.” It’s a legitimate obstacle. Between rising housing costs, inflation, and everyday expenses, saving enough cash to get started can feel overwhelming. That’s exactly why Down Payment Assistance programs exist.

Down Payment Assistance programs, commonly called DPAs, have always been a topic close to my heart. Early in my lending career, I helped create local assistance programs. While I eventually moved away from program development, I spent the next three decades underwriting mortgages that used many different types of DPAs.

If you’ve dismissed homeownership because you think you need a large down payment, it may be time to take another look. There are thousands of assistance programs across the country, and one of them may be a perfect fit for your situation.

What Are Down Payment Assistance Programs?

There are numerous and varied DPAs across the country. These programs exist at the federal, state, county, and city levels, as well as at the non-profit level. They are all designed to help consumers purchase a primary residence. It is common for DPA requirements to state that it must be for a first-time homebuyer (meaning you haven’t owned a home in the past three years), but that is not the case for every organization offering DPAs.

The first thing to know is that you need to find a program and see if you qualify. Some programs have income limits, while others do not. Some require a “silent” second mortgage; others do not. Some focus on particular neighborhoods, and others are aimed at specific groups, such as Tribal programs.

Common Types of Down Payment Assistance

Let’s start by looking at some of the most common types of programs available.

Income-Based – These programs set maximum income limits based on family size and location. For example, the maximum income for a family of four in San Francisco, California, is much higher than in Birmingham, Alabama. This difference reflects the higher cost of living in San Francisco, with housing being the main factor.

Location-Based – These programs are usually sponsored by state or county housing groups that aim to revitalize specific neighborhoods and attract new residents. They may have income rules, but the focus is often on the home’s location, and they may be more flexible with income requirements.

Cultural – These programs are created for specific cultures, including Indigenous peoples and Tribes. For instance, some tribal housing authorities provide down payment assistance grants to help members purchase homes on or near tribal lands.

How Down Payment Assistance Programs Work

Some DPA programs require a “silent second,” meaning the program funds the down payment and sometimes the closing costs. Your lender funds the first mortgage, and the DPA records a second mortgage on the home. Typically, this loan does not need to be repaid as long as you maintain the home as your primary residence for a specified period of time. If you sell or refinance too soon, you may have to repay part of the funds. Most of these programs are forgiven over time, and the forgiveness schedule is based on the program’s rules.

For example, a program might offer $15,000 toward the down payment and closing costs. The organization places a “silent” second mortgage on the home. Each year, 25 percent of this second mortgage is forgiven. After four years as your primary residence, the full amount is forgiven. However, if you sell after two years, the organization recoups 50 percent of the funds to use for another homebuyer.

Another type of DPA is a grant. Grants provide funds based on the organization’s requirements, with no second mortgage required and no repayment.

Other programs offer funds with a second mortgage and a small repayment plan. These plans are usually very flexible and require only a few years of small payments before forgiving the remaining balance. They are designed to keep homeowners in their homes for a specific period of time.

Finally, there are Shared Appreciation Programs. This is a complex type of down payment assistance program. Because of this, I've written a dedicated article explaining how they work, who they may benefit, and the tradeoffs to consider before applying. You can read that article HERE.

Finding the Right Program for You

As I stated in the beginning, there are many types of programs across the country. So, where do you start? I always suggest starting with the DPA organization. Not every lender is approved to work with every DPA organization. In fact, it is very common for both lenders and their underwriters to be trained and certified to work with different DPA programs. So start there.

Find an organization that offers DPAs that fit your situation, whether based on culture, neighborhood, or income. Review their requirements and identify which lenders are approved. Then get pre-qualified with that lender, making sure they understand which DPA you plan to use.

To help, I have built a list of DPA resources for consumers and industry professionals. I do not intend to reinvent the wheel, as there are already many resource sites available. I will gather these resources on a helpful DPA page. Keep in mind that this is a moving target. Programs can run out of money or lose funding during the year, so availability can change.

Final Thoughts on Using Down Payment Assistance

Remember, the down payment is only one part of the process of qualifying for a mortgage. You still need to meet both the regular mortgage requirements and the DPA program requirements. This article is meant to help guide you toward viable options for down payment assistance.

Do your homework, and you may find the perfect DPA to help you get into either your first home or your next primary residence.

LINK to DPA RESOURCES

Share

Give Me Credit Podcast is available on Substack, Apple Podcasts, and Spotify.

Give Me Credit - Apple Podcasts

Give Me Credit - Spotify

One year ago, John Mackey and I launched Give Me Credit with a simple goal.

Help consumers understand the financial systems nobody ever taught us.

Forty-five episodes later, we’ve talked with attorneys, credit experts, mortgage professionals, appraisers, and consumer advocates. One theme appeared over and over again:

Most financial struggles aren’t caused by a lack of intelligence.

They’re caused by confusion.

Subscribe now

In our Season One finale, we revisit seven lessons that shaped the first year of the podcast.

From credit scores and debt collection to bankruptcy and mortgage underwriting, these truths can help replace fear with understanding.

We’ll be taking a short summer break and return with Season Two on September 8, 2026. During this time, we will be running encore presentations of our top content that you might have missed.

But our work isn’t finished.

We’ll begin developing new episodes in July, and we’d love your input.

Share

What financial topics would you like us to cover in Season Two?

Reply to this email, leave a review, or send us your questions. Your feedback helps shape future conversations.

Leave a comment

In Episode 45 of Give Me Credit, John Mackey and I take a hard look at Experian and ask some uncomfortable questions.

We discuss:
• How credit bureaus evolved from data repositories into marketing platforms
• Why “free” credit monitoring services are rarely free
• How consumer data is monetized
• The psychology behind pre-approved credit card and loan offers
• Predictive modeling and surveillance capitalism
• Why the system often rewards lender profitability rather than financial education
• How consumers can recognize marketing disguised as helpful advice

Subscribe now

The modern credit system is far more complex than most people realize. Understanding how it works can help you avoid becoming the product.

Listen now and decide for yourself:

Is the credit industry helping consumers, or helping itself?

🎙️ Give Me Credit with JS Whaldo and John Mackey

Please share the episode with anyone who wants to understand how credit really works.

Because informed consumers make better financial decisions.

Share

People are hearing terms like Non-QM loans, bank statement loans, asset depletion loans, and DSCR loans. Some consumers are finding information on social media. Realtors are hearing about these products from loan officers. Everybody seems to be talking about them, but very few people are stopping to explain what they actually are and who they’re designed to help.

After more than 30 years in mortgage underwriting, I understand why people are confused. We have an entire industry that loves acronyms, and somewhere along the way we forgot that most people don’t speak “mortgage.”

So, let’s clear this up.

These are legitimate mortgage products. They aren’t for everybody, and they aren’t mainstream loan programs like FHA, VA, USDA, or conventional financing. They may come with a slightly higher cost, but for the right borrower, they can be incredibly useful tools.

Why Alternative Mortgage Loans Are Becoming More Popular

The American workforce doesn’t look like it did twenty or thirty years ago. Today, many people own businesses, work as consultants or independent contractors, or have multiple streams of income. Others have accumulated significant assets and have retired from the traditional workforce. The reality is that fewer borrowers fit neatly into the W-2 box than they once did.

Traditional mortgage underwriting was largely built around W-2 wage earners with steady, predictable income. That works beautifully for millions of people, but not everybody fits inside that box.

Honestly, that’s nothing new.

Alternative Mortgage Loans Are Not New

What’s changed is the borrower.

I’ve spent my career reviewing loan files, and one thing I’ve learned is that financial strength takes many forms. Some people receive paychecks every two weeks. Others own businesses. Some people build investment portfolios. Some spend decades accumulating retirement assets. Everybody’s story looks a little different.

As the workforce has changed, mortgage products have evolved to recognize those differences.

Now, before we dive into a few of the most popular Non-QM loans and all the other acronyms floating around, let’s start at the beginning.

Consumers and Realtors hear the terms QM and Non-QM all the time, but what do they actually mean?

What Is the Difference Between a QM Loan and a Non-QM Loan?

Frankly, I think the names themselves have created a lot of unnecessary confusion. QM stands for Qualified Mortgage, while Non-QM means Non-Qualified Mortgage.

When consumers hear “Non-QM,” they often assume it means bad credit, risky borrowers, or some modern version of the loans that caused problems back in 2008.

That isn’t what we’re talking about. In fact, in my experience, it has always been very clear that the borrowers utilizing these types of loans must be very strong borrowers. Most of these products require excellent credit, reserves, and low debt-to-income ratios. These are not sub-prime loans.

Think of a Qualified Mortgage (QM) loan as the traditional lane. Conventional loans, FHA loans, VA loans, and USDA loans all fit into that category. They follow a certain set of rules and documentation requirements that work very well for millions of borrowers.

I’ve seen borrowers with excellent credit, large down payments, and plenty of money in the bank who simply didn’t fit neatly inside those guidelines. Not because they were risky, but because their income looked different.

Maybe they owned a business. Maybe they were retired. Maybe they had investment properties. Maybe their accountant had done an excellent job minimizing taxable income.

The borrower wasn’t the problem. The paperwork was.

Non-QM simply means there may be another way to document the ability to repay the loan. Underwriting still exists. Documentation still exists. Common sense still exists. The guidelines may be different, but the standards haven’t disappeared.

These aren’t “anything goes” loans. They’re just designed for people whose financial lives don’t fit perfectly inside the traditional box.

These loan products offer flexibility, but that flexibility comes with additional safeguards. Lenders aren’t lowering their standards. They’re simply changing the way income is documented while strengthening other areas of the file to offset the additional risk.

Lenders are still legally required to comply with Ability to Repay (ATR) rules. In other words, federal law still requires lenders to verify that borrowers have the ability to afford the mortgage. That requirement doesn’t disappear simply because the income is documented differently.

These are not stated income loans. The “no-doc” days are gone and, frankly, those practices are illegal. Non-QM underwriters don’t simply take a borrower’s word for their income. The income is still verified. It’s just proven in a different way.

Let’s look at a few of the most popular Non-QM loan products currently being used to get a better idea of some flexible mortgage documentation tools.

Asset Depletion Loans Can Help Borrowers with Significant Assets

Over the years, I’ve seen retirees with substantial retirement accounts, brokerage accounts, and investments struggle to qualify because they no longer receive a regular paycheck. On paper, they may appear to have very little income, yet they have spent decades building wealth.

Having assets and having monthly income are not always the same thing.

Asset depletion loans allow lenders to use certain assets to help establish qualifying income. That can be incredibly helpful for retirees and high-net-worth borrowers who have the resources to repay a loan but don’t have traditional income showing up every month.

Sometimes the money is there. It’s just not arriving with a pay stub attached or even on a regularly scheduled basis. This type of loan allows the borrower to leave the assets in place and continue with their investment and tax strategies without requiring the cash to be withdrawn or liquidated.

One of the most common types of Asset Depletion programs is called a “Core Calculation”. Underwriters calculate qualifying monthly income by applying an amortization or depletion formula to the borrower’s eligible assets.

For instance, a borrower may have $200,000 in a savings account and one million in an investment or IRA account. The underwriter will take the $200,000 and typically 70% of the investment account ($700,000) and add those together, resulting in $900,000 in assets. That $900,000 is divided by 120 months, resulting in $7,500 in monthly income used to qualify for the mortgage.

It is important to know that not all assets are treated the same in this calculation. Some assets, such as stock accounts, are considered more volatile, so only a portion of those account balances can be used (see the example above).

As with all of these loan types, it’s important to have a detailed conversation with your lender if you are interested in this type of loan so that you understand what can and can’t be used in the calculation.

Bank Statement Loans Are Popular with Self-Employed Borrowers

This is probably one of the most misunderstood mortgage products out there.

I’ve watched successful business owners get frustrated for years because they do exactly what they’re supposed to do. They work with accountants, write off legitimate business expenses, and legally minimize their tax liability.

Then they apply for a mortgage and discover that their tax returns make them look far less profitable than they really are.

I’ve always found that a little ironic.

Bank statement loans take a different approach. Instead of relying solely on tax returns, lenders review 12 or 24 months of bank statements to understand the business’s actual cash flow.

These programs can work well for self-employed borrowers, independent contractors, consultants, real estate agents, and small business owners whose financial picture isn’t fully reflected on their tax returns.

No, these are not “no documentation” loans. Trust me. There is still plenty of documentation involved.

The difference is that underwriters look at how money actually flows through the business rather than focusing exclusively on taxable income on tax returns.

There are typically two types of Bank Statement programs available. One is where they use personal bank statements, normally used by sole proprietors or contractors who do not maintain a separate business account. The other is the Business Bank Statement Program, where the borrower provides corporate or business bank statements. The calculation is different for each.

The basic explanation of these loans is that the underwriter calculates the borrower’s cash flow based on monthly deposits. This figure is averaged over either 12 months or 24 months. In many cases, the underwriter isn’t concerned with taxable income at all. They’re looking at real-world cash flow. If a borrower’s deposits show consistent, stable monthly deposits of $15,000 for a year, the Non-QM lender qualifies them based on that liquid reality, leaving the borrower’s tax-reduction strategies completely unpenalized.

Typically, underwriters can use 100% of the deposits from personal bank statements. A calculation of operational overhead is normally applied when using business bank statements to account for operational expenses. The thought process is that once it’s in your personal bank account, the expenses have already happened. If it’s in your business account, the guidelines might call for an expense ratio to be applied to the averaged deposits.

So using the example above, this could mean that the $15,000 per month is not the qualifying income; it is reduced by a predetermined expense ratio. In this example, let’s assume a 40% operation expense ratio. Now the qualifying income is $9,000 per month because the 40% expense ratio ($6,000) is deducted.

The operational expense percentage used in these calculations can vary depending on the type of business being evaluated. A restaurant has much higher overhead than a web design company, and the operating expense percentage used will reflect that.

Things can get messy when borrowers mix personal and business finances. The rules become much more complicated, and in some cases, borrowers may no longer qualify for this type of program. That’s one reason I always encourage business owners to maintain clean records and separate accounts.

Subscribe now

DSCR Loans Have Become Popular with Real Estate Investors

Another term that seems to be everywhere right now is DSCR, Debt Service Coverage Ratio. But don’t let the name intimidate you because the concept is actually pretty straightforward.

These loans are designed for investment properties. Instead of focusing primarily on the borrower’s personal income, lenders are looking at whether the rental property itself can generate enough income to support the mortgage payment.

In other words, can the property stand on its own? Can the borrower pay the mortgage payment without any other form of income?

That’s why DSCR loans have become so popular with real estate investors. Many investors own multiple properties, and their tax returns can become complicated because of depreciation and other write-offs.

Since a traditional loan doesn’t always tell the whole story, a DSCR loan allows lenders to focus more on the property’s income itself.

For investors trying to build wealth through real estate, these loans can be valuable tools. For instance, for a borrower purchasing an investment rental property (1-4 units), the lender will use a market rent analysis conducted by a third-party appraiser to determine the expected monthly rental income and deduct the expected expenses. As long as the net amount of that calculation meets the lender’s requirements, that is the income used to qualify for this type of mortgage.

Let me show you an example in numbers:

Market Rent: $5,500

Less estimated expenses (25%): $1,375

Net rental income: $4,125

Mortgage PITIA: $2,500

Monthly cash flow: $1,625

The rental income supports the mortgage on its own. No other income required.

This loan is made entirely for investment properties, not for a primary residence transaction.

Alternative Mortgage Loans Come with Trade-Offs

I always believe in presenting both sides of the story.

Alternative mortgage loans aren’t magic, and flexibility usually comes with a price.

Interest rates may be somewhat higher. Down payment requirements can be larger. Reserve requirements are often more conservative. Some programs may require a prepayment penalty, and not every lender offers these programs.

That doesn’t make them bad loans. It simply means borrowers are paying for flexible loan tools.

And sometimes flexibility is exactly what’s needed.

As with any mortgage product, the right loan isn’t necessarily the cheapest loan. It’s the one that best fits the borrower’s financial picture and long-term goals.

Share Mortgage Lending Explained

Another Tool in the Mortgage Toolbox

After more than three decades in mortgage underwriting, I’ve learned that there is no such thing as a one-size-fits-all borrower.

Alternative mortgage loans aren’t shortcuts, and they certainly aren’t loopholes. They still require thorough documentation, and careful underwriting is completed on every loan. The rules and requirements are strict because these programs offer flexibility to accommodate our ever-changing ways of earning a living.

These loans are simply another set of tools that can help qualified borrowers achieve their goals. Because sometimes the challenge isn’t that someone can’t afford a home. It’s that traditional documentation doesn’t always tell the whole story.

People earn income differently today than they did thirty years ago, and alternative mortgage products have evolved to recognize that reality. Good underwriting, however, has always been about understanding the whole picture.

Because sometimes the challenge isn’t that someone can’t afford a home. Sometimes the challenge is simply proving it. And honestly, that’s what these alternative mortgage tools were designed to do.

Leave a comment

In this second conversation with David, we discuss what happens after a court victory, the tools creditors can use to collect debts, and the protections that shield certain assets from collection. We also explore why many cases end in practical negotiations rather than endless legal battles.

Subscribe now

If you’ve ever wondered how judgments really work, this episode offers a fascinating look behind the scenes.

Listen now and share the episode with someone who could benefit from understanding the debt collection process.

Share

It is not.

In our latest episode of Give Me Credit, we break down what an appraisal actually is and why it can completely change the direction of a real estate deal.

We talk about:

• Why appraisals are legal, data-driven arguments
• The difference between appraisals, inspections, and tax assessments
• Why listing prices do not determine value
• How market evidence drives lending decisions
• Why emotions often lose when the numbers hit the table
• The growing role of regulations and third-party oversight

Subscribe now

This conversation pulls back the curtain on one of the least understood parts of home buying and refinancing.

If you have ever wondered why a deal falls apart even when everyone “feels” the price is right, this episode explains it clearly.

Listen now and share it with someone buying, selling, refinancing, or working in real estate.

Share

That snapshot is beginning to change.

A newer scoring model, FICO 10T, is gradually making its way into the mortgage industry and represents one of the more significant changes to credit evaluation I have seen in my career. Unlike traditional scoring models that focus primarily on where a borrower’s credit stands today, FICO 10T looks at how that credit has behaved over time.

That may sound like a small distinction, but it could change how risk is measured and how some borrowers are viewed during the mortgage approval process.

Looking Beyond a Single Moment in Time

The “T” in FICO 10T stands for trended data. In simple terms, that means the model looks at patterns in a borrower’s credit behavior over approximately two years rather than relying solely on a single snapshot.

Traditional credit scoring models evaluate the information on a credit report at the time the score is generated. They can tell a lender what a borrower’s balances look like today, whether payments have been made on time, and how much available credit is being used. Those factors remain important, but they do not always tell the entire story.

FICO 10T attempts to provide more context. Instead of looking only at where a borrower stands today, it examines how that borrower arrived there. Have credit card balances been steadily declining? Are balances gradually increasing each month? Is debt being managed consistently, or are there signs of growing financial pressure?

As an underwriter, I always found the story behind the numbers to be just as important as the numbers themselves. Two borrowers could have similar credit scores while presenting very different levels of risk. One might be steadily paying down debt and improving their financial position, while another might be moving in the opposite direction. Traditional scoring models did not always capture those differences. Trended data is designed to do exactly that.

Why Mortgage Lenders Are Paying Attention

Mortgage lending has always been focused on stability and predictability. When a lender approves a 30-year mortgage, they are making a long-term bet that the borrower will continue to manage their financial obligations successfully.

That is why underwriters evaluate income history, employment stability, available assets, debt obligations, and credit performance. The goal is not simply to determine whether a borrower qualifies today. The goal is to determine whether the patterns in that borrower’s financial life suggest continued success after closing.

FICO 10T aligns with that philosophy. By evaluating credit behavior over time, the model provides lenders with another tool to assess whether a borrower is moving toward greater financial stability or away from it.

For borrowers who consistently pay down debt and manage credit responsibly, that additional visibility may work in their favor. For others whose balances continue to climb month after month, the model may paint a different picture than older scoring systems.

Where FICO 10T Stands Today

One of the biggest misconceptions I am seeing is that FICO 10T has already replaced traditional mortgage credit scores. That is not the case.

The Federal Housing Finance Agency approved both FICO 10T and VantageScore 4.0 as part of its effort to modernize credit scoring within the mortgage industry. However, the transition is occurring in phases, and the mortgage industry is still working through the implementation process.

At the moment, approved lenders participating in the current phase of the transition may use either Classic FICO or VantageScore 4.0 for loans delivered to Fannie Mae and Freddie Mac. FICO 10T remains an approved model, but it is still moving through the final stages of industry preparation and implementation.

This is not unusual. Mortgage lending tends to move carefully whenever significant changes are introduced. New systems must be tested, validated, and integrated into existing processes before they become part of everyday lending decisions.

In other words, FICO 10T is coming, but it is not fully here yet.

Share

Why the Industry Is Interested in FICO 10T

The primary reason lenders, investors, and regulators are paying attention to FICO 10T is simple. They believe it may do a better job of predicting risk.

Several studies have suggested that models incorporating trended credit data provide stronger insight into future loan performance than older scoring systems. The theory makes sense. A borrower who has steadily improved their financial position over the past two years may present a different level of risk than someone whose debt obligations have increased during the same period.

The mortgage industry has always sought better ways to distinguish between borrowers who appear similar on the surface. FICO 10T is designed to provide that additional level of insight.

It is also worth noting that the model can incorporate additional information, including rental payment history when available. That may help create a more complete picture for some consumers, particularly first-time homebuyers and borrowers with limited traditional credit histories.

What This Means for Future Homebuyers

For most consumers, the biggest takeaway is that credit behavior may become more important than ever.

Paying bills on time will still matter. Keeping debt levels manageable will still matter. Building a solid credit history will still matter.

What may change is how those habits are evaluated.

Instead of focusing primarily on where your credit stands on the day your mortgage application is submitted, future scoring models may place greater emphasis on the path that brought you there. Consistently reducing debt, maintaining stable credit usage, and demonstrating responsible financial management over time may become even more valuable than they are today.

For borrowers, that is not necessarily a bad thing. In many ways, it rewards the same habits that underwriters have always looked for when evaluating risk.

Subscribe now

The Bottom Line

Credit scoring has always been an attempt to answer a simple question: how likely is a borrower to repay their obligations as agreed?

FICO 10T does not change that goal. What it changes is the amount of information used to answer the question.

By looking beyond a single snapshot and examining patterns over time, the model provides a more detailed view of how borrowers manage credit. Whether that ultimately leads to broader adoption remains to be seen, but the industry’s direction is becoming increasingly clear.

After spending more than three decades in mortgage underwriting, I can tell you that the most accurate lending decisions have never been based on a single number. They have always been based on understanding the story behind that number.

FICO 10T is simply another step in that evolution.

Leave a comment

In this latest episode of Give Me Credit, John Mackey and I welcome ethics professor Neil Tift back to the podcast for a deeper discussion about algorithmic credit systems and the growing power imbalance inside modern lending.

We talk about:

• How predictive data can override human context
• Why financial hardship often gets treated like personal failure
• The ethical responsibility of lenders and system designers
• Capitalism with a conscience
• What happens when algorithms quietly manage opportunity

Subscribe now

This conversation goes beyond credit scores. It touches on fairness, accountability, and the real lives affected by automated decision-making.

It may be one of our most important conversations yet.

Listen now and tell us your thoughts.

Leave a comment