Mortgage W-2 question

[Anonymous]

I know the previous year W-2 is needed to qualify for a mortgage. My question is this: When determining income does the lender only look at the figure on line 1, which is wages, tips, and other compensation? Or do they add the taxes withheld into that amount to determine what your annual income is? Also if they do add the taxes withheld to determine qualifying income, do they also add in the amount withheld for insurance and 403b accounts? The reason I ask is because the amount on line 1 of my 2006 W-2 form is significantly lower than what my annual salary is on paper. I have several pretax deductions that come out of my paycheck, which helps when I file my taxes. But will it hurt me when I apply for a mortgage?    

[ShanetheMortgageMan]

W-2's are just to show consistency of income.  If you are employed and make salary, then your salary is what is used to qualify.  If you are hourly & are full time, then it's (the hourly rate x 40 hrs x 52 weeks) / 12 months.  Overtime, bonuses, and commissions are averaged out over 2 years.  If more than 25% of your income is commissions or bonuses, then tax returns are often required and a 2-year average of your income is used.  If you are self-employed then it's a 2-year average of your adjusted gross income in most situations.