The type of income you receive will determine how your lender calculates what you make. For example a self employed borrowers income will be calculated differently than someone who is paid hourly. While it is impossible to explain how every type of income is calculated, here are some of the most common types of income and how they are typically viewed by lenders.All income calculations are done with income before taxes are taken out.
For a salaried employee who receives a base pay only and no overtime or bonuses, his or her monthly income will be calculated by dividing their yearly salary by 12 months. The calculated number is the number that will be used for calculating the borrower's debt to income ratio.
Your income can be calculated differently depending on the objective of the Mortgage Professional you work with. With so many different ways to calculate a persons income its best to let the mortgage professional decide which way to go.
Twelve months of Personal bank statement deposits can be used to calculate your annual income as long as the account is in your name only. If the account is a join account you can only use 50% of the annual deposits.
If you receive income that is not taxable, such as social security, banks will "gross up" the amount received, that is, to use a figure higher than the actual income to qualify for the loan.
If you are a W-2 employee and work a second job most lenders will want to see at least 6 months job time to use the second jobs income. They will also be looking for a consistent earning trend for that 6 month period.
