How Much House Can You Afford?
When a loan officer pre-qualifies you, he works backwards to figure your maximum mortgage amount. You can do the same thing. The first step is to determine your monthly income. It isn't quite as easy as it sounds. Lenders only count income they can document through paperwork.
If you are a salaried employee, and don't earn bonuses, it's easy. Get out your paycheck. If you get paid twice a month, multiply by two. If you are paid every two weeks, then you multiply by 26 (the number of pay periods in a year) and divide by twelve. Unless you're a teacher. Teachers don't always work year round and they have special rules.
If you are an hourly employee who works a straight forty hours a week and don't earn overtime income, then it's easy, too. Look at your paycheck, multiply your hourly rate by 40, multiply that total by 52, then divide by twelve.
If you earn overtime, bonuses, or commissions -- it isn't as easy. Lenders don't give you credit for what you are currently earning. They average your income from those sources over the last two years, then add that to your regular salary or hourly monthly income. If you want a shortcut that is usually close, get out your W2 forms for the last two years. Add them together and divide by twenty-four. That is your monthly income.
If you are a teacher, a nurse, a seasonal employee, in construction, or earn only part-time income -- you can use that shortcut, too. Add the figures from your last two years W2's, then divide by 24. It generally gets you close.If you would like more information please contact us at www.massmortgageloan.com
There are variations and exceptions (like those who own their own corporations) but the above should cover most people. If you would like more information please contact us at www.massmortgageloan.com