Monthly Gross Income Calculator
Calculate your monthly gross income based on how frequently you are paid and the amount of gross income you make per pay period. Many lenders will look at a borrower’s monthly gross income to determine what size mortgage the borrower qualifies for
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Gross Income and Mortgage Qualification
Lenders use your gross income, or your income before any deductions such as taxes, social security and medicare, to determine what size mortgage you qualify for. Other factors that determine your ability to qualify for a mortgage include your credit score, monthly debt payments, down payment amount and employment history. Lenders use your monthly gross income to determine how much you can spend on your mortgage payment and total monthly housing expense, which included property tax, homeowners insurance and other applicable fees such as homeowners association dues. For example, if you earn $60,000 in annual salary, lenders use $5,000 in monthly gross income to determine what size mortgage you can afford ($60,000 / 12 months = $5,000).
Gross Income and Borrower Debt-to-Income Ratio
Lenders take your monthly gross income and debt payments and calculate your debt-to-income ratio. Your debt-to-income ratio represents the maximum amount of your monthly gross income that you can spend on total monthly housing expense plus monthly debt payments such as auto, student and credit card loans. Lenders usually use a maximum borrower debt-to-income ratio of 43% to 45% to determine what size mortgage you can afford, although some lenders and mortgage programs apply higher or lower ratios. Borrowers with higher monthly gross income and lower debt payments can afford to spend more on their mortgage payment which enables them to qualify for a larger mortgage. Borrowers who want to increase the mortgage amount they qualify for should pay down their debt to boost their debt-to-income ratio before they apply for a mortgage.
Net Income and What Size Mortgage You Can Afford
Although lenders use your gross income to determine what size mortgage you qualify for, your net income is also important to think about when you apply for a mortgage. Your net income is often called take-home pay because it is the money you earn after all deductions -- including 401(k), IRA and health insurance contributions -- are subtracted from your gross income. Borrowers need to make sure that they are comfortable paying their monthly mortgage payment and total housing expense based on their net income. Borrowers who live more expensive lifestyles may realize that although they can afford a mortgage based on their gross income, it may be challenging to make the monthly payment based on their net income and spending habits. Additionally, just because a lender says that you qualify for a certain mortgage amount does not mean that is the right loan amount for you.
More FREEandCLEAR Mortgage Resources
A detailed explanation of the difference between gross and net income when you apply for a mortgage including a helpful example
Understand how lenders apply debt-to-income ratios to your gross income to determine what size mortgage you can afford
Review our comprehensive overview of borrower qualification requirements before you apply for a mortgage
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