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Figuring Income for mortgage app when over 50% of income is commission based. Please help!

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TanterBeans
New Contributor

Figuring Income for mortgage app when over 50% of income is commission based. Please help!

Help, mortgage gurus!

 

I am trying to figure out where they will put my husband's income when we app next month.  Am I correct in figuring this out?  Same play pan for 4 years now.  Here it is:

 

He is paid a guarantee biweekly and it's called his "draw".  This amount never changes and we refer to this as his salary because no matter what happens or how he performs he is always paid this. 

 

He is paid commission on top of this and it makes up over 50% of his annual income.  These are all W-2 reported.

 

He also receives a 1099 for additional money paid throughout the year.  Maybe 13k last year and I think maybe 2k last year - I have to double check. 

 

Should I simply take his last two years of W-2's and 1099's, add them up and divide by 24 to get his monthly income?  Do I need to consider what he was paid from January 2013 through now or wil they probably not even look at that? 

 

Thank you so much!!!!

Message 1 of 7
6 REPLIES 6
TanterBeans
New Contributor

Re: Figuring Income for mortgage app when over 50% of income is commission based. Please help!

Totally off topic but does anyone else feel like it's a full-time job just researching and getting ready for a mortgage and to buy a house?  Oh my gosh.   I'm beginning to feel like I should be punching in a time card every morning.  It never seemed this much work when I bought my first house 15 years ago!  Oh well, back to work!! lol

Message 2 of 7
TanterBeans
New Contributor

Re: Figuring Income for mortgage app when over 50% of income is commission based. Please help!

Ugh.  Well, this REALLY sucks because I just pulled out the 2011 tax statements and I forgot that he had received a promotion mid 2011 so his income is much lower Smiley Sad

 

He makes double that amount now and will continue to make double that amount.  Does this severely hurt us?  Is there any chance they will consider that factor? 

 

I don't think we are going to be in the price range of house that we want now Smiley Sad

Message 3 of 7
MovingForward_2012
Valued Contributor

Re: Figuring Income for mortgage app when over 50% of income is commission based. Please help!

I think the average income on his W2's for the last two to three years should suffice. I closed 2/6 and at that time had not filed my 2012 taxes yet. I completed them the 3rd week of Feb. My LO said that if i had the W-2 for 2012 that they would take it but it hadn't arrived in the mail at time of preapproval so they used 2009, 2010 & 2011 taxes. I only think the Self-Employed must show their filed taxes for 2012 but eventually everyone will after the April 15th deadline I think, which is coming soon.

I totally agree that it is more than a full time job, especially if you want/need to close as soon as possible. Luckily (for mortgage loan reasons, not lucky for health reasons), I was out on disability leave during the mortgage process and during the day, I was either on the phone or over at the new house for a scheduled inspection or walkthrough. And then when everyone in the house was fed and asleep, I would get on the computer to work on my homebuyer's class which was EIGHT HOURS LONG (had to split it up over several days...was a requirement for the loan program I went with) or I was gathering info for conditions, writing LOEs, faxing mountains of paperwork, sending emails...don't you "LOVE" when you start a long fax and leave and come back to find out the printer jammed?!? My little printer/fax/copy machine was struggling! I ran out of ink...ugh! There were two occasions where I worked through the night and got to bed at 5am the first night and 7am the second night. It was brutal. And it is not like you can sleep in because the phone rings at about 10-11am about the paperwork you faxed in, etc. There is definitely a lot involved in a mortgage application! So no, you're not the only one that thinks it is a full time job. :-)
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! Smiley Happy Last App: 4/5/13 Gardening until July 2014
Message 4 of 7
MovingForward_2012
Valued Contributor

Re: Figuring Income for mortgage app when over 50% of income is commission based. Please help!

Are you both applying together? What is the total household income now and what was it before the promo? What is the price range of homes you are looking at? They usually average the last 24 months of income. What is the running average for the past 24 months?
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! Smiley Happy Last App: 4/5/13 Gardening until July 2014
Message 5 of 7
TanterBeans
New Contributor

Re: Figuring Income for mortgage app when over 50% of income is commission based. Please help!

Moving Forward - thanks for making me feel like I wasn't crazy.  I was beginning think it was just me that seemed to be spending a mountain of time on this stuff! Wow, your story sounds like it's going to me!  Well, hopefully it ends in a house also Smiley Happy

 

My husband is going to apply alone.  We are doing it this way because I haven't had income in two years (decided to quit and stay home with our youngest and how we have another one on the way! surprise! lol).   We are also doing it that way because we don't have to include my credit card debt and student loans as expenses.

 

Total Income from the tax statements is as follows.  I hope this posts right, if not I will go back and edit, just copying and pasting from a spreadsheet I put together.

 

 20112012
W-2$108,793.41$174,796.37
1099 $13,710.72
 $110,804.41$190,519.09

 

We are going FHA.  The price range is 349k, with 3.5% down, we would like to borrow the max $327,500.00

 

The average monthy income for January, February, and March 2013 has been about 12-13k total (including W-2 and 1099 income). 

 

His reporting monthly debts are as follows:

 

Credit   Cards-$25.00
Ally Car Pymt-$821.02
Student Loan-$126.00
Child Support-$1,900.00

 

 

I only put $25 credit card payment because we just paid them all down to drop our utillization down and boost his score.  I assumed that we would keep one card with a small balance every month just for "reporting" purposes. 

 

Any help would be so much very appreciated!!!!!  We are really hoping to be in the 350k house range because this is our 6th child (and last!!!) and we really need the room.  The cost of living where we are is unfortunately very high too Smiley Sad

Message 6 of 7
MovingForward_2012
Valued Contributor

Re: Figuring Income for mortgage app when over 50% of income is commission based. Please help!

Your DTI is in great shape even with average. He should be an easy approval. I make slightly less than he did in 2011 and our home purchase price was $347,900. Congrats on the BABY!!! Smiley Very Happy
Cards: Orchard Bank ($1100) | Cap1 Cash Rewards ($2500) | Chase Freedom ($1000) | Best Buy ($2500) | Discover It ($1000) | Barclay Rewards ($2500) | Current scores: EX FAKO: 684, CK TU: 649, FICO EQ: 680, FICO TU: 698, FICO EX: 658 Happy Homeowner Since 2/6/13! Smiley Happy Last App: 4/5/13 Gardening until July 2014
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