Five questions loan officers should ask before preapproving complex income

A complex-income preapproval does not usually fail because the loan officer cannot add. It fails because one assumption was treated as settled before anyone proved it. The borrower then shops, negotiates or gives notice based on a number that changes when the file reaches a deeper review. That is an avoidable trust problem. The loan officer does not need to perform the underwriter’s job before issuing every preapproval. The LO does need to identify what is carrying the decision, what could invalidate it and what remains unresolved. Five questions make that discipline practical. 1. What am I actually promising? There is a difference between saying the borrower appears to have a workable path and presenting a maximum approval as if every income source has already survived review. Before giving the borrower a number, define what the number assumes. Is it supported by verified base pay alone? Does it depend on variable compensation, business income, restricted stock or rent? A preapproval becomes safer when the LO can explain its load-bearing assumptions in one sentence. 2. Which income source is carrying the decision? Complex files often contain several legitimate sources, but only on...