How to Calculate Your Income for a Mortgage: A Step-by-Step Guide

Introduction

When applying for a mortgage, accurately calculating your income is essential. This guide will help you navigate the process, starting with identifying your base pay type—whether it’s fixed or fluctuating—and then determining any additional variable income like tips, bonuses, or commissions.

Step 1: Identify Your Base Pay Type

The first and most important step in calculating your income for a mortgage is identifying your base pay type. You will only use one of the following categories: non-fluctuating base pay or fluctuating base pay.

Option 1: Non-Fluctuating Base Pay

If your income is consistent and does not vary from paycheck to paycheck, you fall into this category. This typically includes salaried positions or hourly wages where the hours worked each week are consistent.

Tool 1: Non-Fluctuating Base Pay Calculator

Option 2: Fluctuating Base Pay

If your income varies because of changing hours or rates, you should use this option. This category applies to jobs with inconsistent hours, seasonal work, or where the pay varies frequently.

Tool 2: Fluctuating Base Pay Calculator

Example: If your income varied over the past two years, add up your total income and divide by the number of months or pay periods to find your average monthly income.

Step 2: Determine Any Additional Variable Income

Once you’ve calculated your base pay (either non-fluctuating or fluctuating), the next step is to identify and calculate any additional variable income. This might include tips, overtime, bonuses, or commissions.

Tips, Overtime, Bonus, and Commission Income

Variable income can significantly impact your overall income calculation, so it’s important to capture this accurately.

Tool 3: Tips, Overtime, Bonus, and Commission Calculator

Step 3: Self-Employment Income

If you’re self-employed, calculating your income is more complex. Due to the specific requirements and potential deductions involved, it’s best to consult a professional.

Request a Meeting

Why Request a Meeting? Calculating self-employment income involves understanding profit and loss statements, tax returns, and potential business deductions. Professional guidance ensures that all relevant income is considered, maximizing your chances of mortgage approval.

Conclusion

Accurately calculating your income is the foundation of a successful mortgage application. Start by identifying whether you have fluctuating or non-fluctuating base pay, and then determine any additional variable income. If you’re self-employed or need further assistance, don’t hesitate to reach out and schedule a meeting with us. We’re here to help you every step of the way.