How do mortgages calculate annual income?

savagetyler · ‎03-25-2016

Thinking about a house to purchase but would like to know how do they calculate your income. If 2014 W2 I made less then half of my 2015 W2 what would they consider my income? Would it be the average of both years or would it be the current pay?

Mrsg714 · ‎03-25-2016

Current pay since you're W2. I'm going through the process right now. I just received a raise that'll take effect in April, but we're able to use my new salary since it'll be before the closing date. FWIW, I made significantly less in 2014.

savagetyler · ‎03-25-2016

Thanks for the answer

Anonymous · ‎03-26-2016

I'm self employed and two banks thus far have used the average of my 2014 & 2015 income.

I don't know if this is just because I'm self employed, or if some banks do this regardless of employment status. None of them have been interested in the fact that this year, my YTD income is on track to be higher than both 2014 & 2015.

StartingOver10 · ‎03-26-2016

@Anonymous wrote:
I'm self employed and two banks thus far have used the average of my 2014 & 2015 income.

I don't know if this is just because I'm self employed, or if some banks do this regardless of employment status. None of them have been interested in the fact that this year, my YTD income is on track to be higher than both 2014 & 2015.

Yes, it is because you are self-employed. Self-employed borrowers' income is averaged over 24 months.

w-2 type income is not averaged - current income is used.

Anonymous · ‎03-26-2016

For W-2 employees, do they calculate what your earnings will be for the year based on your current pay stubs? My base salary is one rate, but I have a lot of differentials that get added for weekends & nights.

Mrsg714 · ‎03-26-2016

As a W2 employee, my differentials weren't added in. It could be because I don't get on call pay very often. The average of my bonuses for the last two years were added in, but I had to show proof that I had been getting them two years at least and would continue to be eligible for them going forward.

Anonymous · ‎03-26-2016

I always work weekends & nights. And my W-2s for 13, 14 & 15 have my total income which includes them. Plus my last pay stub for 2015 shows the breakdown.