W2 income Averaging?

[Tweak3D]

Ok, so I am going to talk with my Loan Officer tomorrow regarding out USDA Guarnteed loan, but this question is really bugging me. I started working a new job in January of 2010 so I've been there now for over 2 years. because I started at the end of January, I didn't make as much as I would have stating at the beginning of the year. Between then and now, I've received 2 performance based raises and a promotion increasing my income quite a bit (from about $19/hr to 23/hr).

My Wife graduated from school in 2010, but had a student job on campus. Before she graduated, she was offered a part time position (30hrs/wk) with full benefits and what not. About a year later, she was moved up to full time. As such, her income has gone up not only from her original hiring from being a student (same employer), but also because she went full time.

I am worried, as my Loan Officer keeps mentioning that the Underwriter will be averaging our incomes over our last 2 tax returns (we are both W2 employees) for some of their calculations. Is this true? As such, what is the weight of this? We make enough money now to afford the house we want based on the preapproval we received. Nothing i've read online mentions how this average is used and how having a low average will affect our approval.

The 2009-2010 average would be in the range of $36,000 because of our extremely low 2009 numbers. The 2010-2011 Average would be better, but still on the low side, in the range of $64,000.

Our current gross income (based on hour full-time positions and hourly base rates) is $76,419.20 I also received Overtime, Yearly performance raises, and Bonus, but cannot include that at the moment as I don't have a letter from my employer (working on it).

So do we have anything to worry about? I know they look to see that your year over year income is increasing, which for both of us it has significantly, but these averages scare me as they are not very good, nor are they good enough to afford the house we are looking to buy. Any insight would be greatly appreciated.

[LondonMassey]

I don't necessarily understand why, after what has happened in with the market over the past few years, you would consider using overtime and other "extra" income to qualify for a home loan... always keep in mind that anything is possible.  I wish you and your family the best, just be safe about your finances.

[Tweak3D]

I work in an it position where I have to work during the week, but also am required to do on call after hours support and work weekend shifts during our busy seasons (I work for a tax firm) over time isn't a ton, but even during the past few bad years, it's given me 4-6 thousand dollars more a year each year. Some jobs require this, so it makes sense to include it as it isn't unreasonable.

[Tweak3D]

also, I should probably clarify, we don't need the additional income for Overtime or Bonuses for approval. We were pre-approved on our current base income as it is.

I am looking for additional compensating factors to be considered to strengthen my profile with the lender as the only negative in my profile is a high DTI from student loans.

I keep seeing people talking about steady or increasing income both being acceptable, which makes sense. Look at what the past has shown, in my case, increasing income due to raises and promotions and then base the approval off the current income. Just confused if this is the correct understanding or not.

[rckstrscott]

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@LondonMassey wrote:

I don't necessarily understand why, after what has happened in with the market over the past few years, you would consider using overtime and other "extra" income to qualify for a home loan... always keep in mind that anything is possible.  I wish you and your family the best, just be safe about your finances.

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Just an FYI for you LondonMassey, but there are many, many jobs that have required overtime based on shift and shift differential. Example: I work 36 hours one week, 48 the next. I have been doing this for 6 years. There is absolutely no reason for me not to factor in overtime. My LO is factoring in my overtime as an average. I have worked many extra hours on top of my scheduled overtime as well. Why would you not want to factor this in?  I worked hard, and continue to work hard. I could lose my job just like anyone, I could be laid off, I could be fired, I could get injured.

My company could fold (not likely since its a top 5 pharma company but you get what I'm saying) -- I refuse to live in fear of the last 5 years of the economy.

Your situation may be different, and I understand your intention with this post, but without being in the posters shoes, you really don't know the reason why they would want to factor overtime, so I think the comment is misguided.