Home Loans
8 Quick Tips About Income Documentation
(presented by www.refinance-refinance.net - mortgage lenders)
By Ben Afzal
Basic Components Of Your Income
Lenders generally divide your income into the following categories:
-base salary
-commission
-overtime
-bonuses
-dividends/interest
-net rent
-other
Base Salary
This is the most straight forward component of your income. This is your annual base salary calculated on a monthly basis.
If you are paid every other week make sure to properly calculate your monthly income. Multiplying a paycheck you get every two weeks means you are factoring in only 28 days of pay.
Commission
This part is usually for commissioned people such as salespeople. Lenders understand that this component of income can vary drastically from month to month. A temporary spike in commission income just prior to making a loan application may be viewed by the lender as a temporary increase in income. They may figure that your income is not likely to remain that high continuously.
Overtime
This is the overtime compensation you are paid. Unless this is something you can document that you get usually this type of compensation may not be factored in fully by the lender.
Bonuses
These are usually monthly, quarterly, and yearly.
Lenders will treat this income differently than regular base income. If you can show this is usually earned than the lender will value it more highly. If it is a onetime thing or unpredictable the lender will discount this.
Dividends/Interest
This is income from your investments and bank account.
Net Rent
This is the net rental income you receive from your rental properties. It is income you receive after you have paid the mortgage and other expenses on your rental properties. Lenders usually factor this income at 75% of its maximum annual income because of projected vacancies from time to time.
These are other forms of income, such as small part time jobs or seasonal jobs.
As you can see, a lender can view different parts of your income vary di!
fferentl
y. Knowing this can help you prepare for a smoother mortgage loan process.
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