When it comes to getting qualified for a mortgage by a loan officer, your monthly income is the factor that is mainly focused on. The entire calculation of your mortgage depends on your monthly income, and the debt-to-income ratio you currently have. If you want to know whether your mortgage will be approved or not, it is important to analyze your monthly income the way lenders are supposed to do it.
Lenders only consider income that is properly documented for. Any other form of income you have which is not properly documented, no matter how regular it is, cannot be taken into account. Mortgage calculations are not as difficult as they might seem, especially since a home mortgage calculator can be used for accuracy and convenience. For people with fixed salaries and no bonuses earned throughout the year, these calculations are the easiest.
For self-employed people, these calculations can be a tad bit difficult. Your only income considered is the amount you have declared with the IRS for the past two years. You can determine your income in case of being self-employed by taking a look at profit stated in your Schedule C. Add the figures of the last two years and divide by 24 to get your average monthly income.
If you are paid monthly, you can use the amount on your paycheck as your monthly income. If you are paid twice a month, multiply the amount on your paycheck by two. If you are paid on a weekly basis, multiply your pay by 52 and divide by 12. Those who are paid on hourly basis and work for 40 standard hours every week should multiply the amount on their paycheck by 40 and then multiply the total by 52 and then divide by 12.
These calculations are valid for all those employees who earn a fixed salary throughout the year. However, there are some exceptions to these calculations such as teachers, who don’t usually work all year, or people who earn commission, bonuses or overtime.
For all these people, an average of their total income for the last two years, including that earned from varying sources, is calculated. You can easily determine this yourself from your W2 of the last two years. Add the amount on these forms and divide by 24 to get your average monthly income. Mortgage calculations can be quite easily handled using a mortgage loan payment calculator that is available for individuals.