Declining Income

I am sure you know what declining income is but what about in relation to getting a mortgage loan?
It is understandable that someone who is self employed or commissioned has had a rough couple of years. It might be that someone had more expenses either unreimbursed  business expenses or self employment expenses which has caused income to be less year over year. Well from an underwriting standpoint declining income is a problem. Unfortunately underwriters always use a worst case scenario when looking at income. They cannot predict that the income will not continue at the current lower rate and in some cases have a hard time believing that income is to continue at all. The guidelines say to use the lower declining income and to determine the likely hood of continuance of income for 3 years.
You ask who can predict the future? The only way an underwriter can feel comfortable in making a decision is with enough documentation in the file to defend the decision. You may not know this but 100% of loans underwritten today are reviewed again after closing by another person deciding whether the underwriter made the right call. So when we ask for volumes of information on a borrower it is not for some personal enjoyment it is to satisfy many many people who will pick up and review the loan file for months into the future.