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collectingblues
Posts: 9
Registered: ‎07-17-2012
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Conventional mortgage: Which gross wage is used?

I'm a salaried employee, which, as I understand, means that my gross wages will be considered when determining DTI; I'll also be applying for a conventional loan so that I can pay the MI upfront in a single premium, and not have to have it tacked on the the loan.

That said: Which gross wages do lenders use when determining DTI? There is about a $5,000 difference between the gross wage reported on my pay stub, and the gross wage that is taxable and reported on my W-2, due to health insurance, 403(b) distributions, FSA, etc. If lenders use the pay stub wage, I'm easily within DTI limits, but if they use the W-2 wage, it's getting pretty close...

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webhopper
Posts: 7,225
Registered: ‎09-16-2011
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Re: Conventional mortgage: Which gross wage is used?

They use the average of the gross income from last two years tax returns. The pay stubs are just used to document that you are still employees and that you are still making about the same amount of money.

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Member
collectingblues
Posts: 9
Registered: ‎07-17-2012
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Re: Conventional mortgage: Which gross wage is used?

Interesting. I'm not super thrilled with that, but I can change my repayment plan on my student loans to a lower payment and make it work.

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tooleman694
Posts: 2,297
Registered: ‎08-25-2011
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Re: Conventional mortgage: Which gross wage is used?

The FSA is a damn good question, iv been wondering this too.

 

When I was figuring out my DTI I just gave them my yearly salery minus the extras my employer gives me.

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JM-AM
Posts: 3,302
Registered: ‎06-09-2010
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Re: Conventional mortgage: Which gross wage is used?

Salaried employees usually only have to furnish copies of pay stubs for last 30-60 days. They will still do am income verification with employer but it should match your paystubs wages not your w2 wages after deductions. 

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StartingOver10
Posts: 4,545
Registered: ‎03-06-2010
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Re: Conventional mortgage: Which gross wage is used?


JM-AM wrote:

Salaried employees usually only have to furnish copies of pay stubs for last 30-60 days. They will still do am income verification with employer but it should match your paystubs wages not your w2 wages after deductions. 


The above is correct. However, the lender will still want a copy of your tax return.

 

I don't know where you are located (geographically) but here in Fl most of the lenders still require your tax returns for the two years leading up to mortgage approval even if you are salaried. It may be lender specific (but I don't think so), but all the lenders I work with require the returns at some point early in the process (including a signature of the 4506T) to order the tax transcripts. This is the way that they verify the income you are claiming on your taxes matches your salary and is not reduced by business expenses. Or that the income you are claiming after business expenses is enough to make the mortgage payments with the appropriate ratios.  Yes, it is unusual that a salaried employee would deduct business expenses on their tax returns, but apparently enough people do it that it is SOP now to check the tax returns.

 

When we had the height of the real estate market in the mid-2000's tax returns were not necessarily required (NINA loans) but they have been over the past several years since the mortgage meltdown.


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