SAFE MLO Qualification: Processing & Underwriting question: borrower's overtime

SAFE MLOQualification: Processing & Underwriting

A borrower's overtime was $8,000 last year and $5,000 the year before; this year it is on pace for $2,500. How should an underwriter view this overtime?

A As usable at last year's $8,000, the highest year of the three
B As declining income that needs analysis
C As usable only if the employer confirms more overtime
D As stable, so average the three years

Show the answer and explanation

Answer: B. As declining income that needs analysis

Variable income such as overtime must be stable or increasing to be used; a declining trend requires the lender to analyze the reasons and may mean using the lower current amount or excluding it (Fannie Mae Selling Guide B3-3.3-02, dated Mar 4, 2026: if income is decreasing, the lender must confirm it has stabilized, otherwise it is not eligible). A sharp year-to-date drop is a red flag for stability. Source: Fannie Mae Selling Guide, B3-3.3-02 (Mar 4, 2026) (as at 11 Oct 2026).

Common mistake

Averaging overtime without noticing it is falling.

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Original study material mapped to the public NMLS Content Outline; not a real test question.Not affiliated with or endorsed by NMLS, CSBS or SRR. Verify figures and rules against current guidance before relying on them.