Salary and Hourly Wages - Calculated on a gross monthly basis, prior to income tax subtractions.

Part Time and Second Job Income - Not usually considered unless it is in place for 12 to 24 straight months. Lenders view part time income as a strong compensating factor.

Commission, Bonus and Overtime Income - Can only be used if received for two previous years. Further, an employer must verify that it is likely to continue. A 24 month average figure is used.

Retirement and Social Security Income - Must continue for at least three years into the future to be considered. If it is tax free, it can be grossed up to an equivalent gross monthly figure. Multiply the net amount by 1.20%.

Alimony and Child Support Income - Must be received for the 12 previous months, and continue for the next 36 months. Lenders will require a divorce decree and a court print out to verify on time payments.

Notes Receivable, Interest, Dividend and Trust Income - Proof of receiving funds for 12 previous months is required. Documentation showing income due for 3 more years is also necessary.

Rental Income - Cannot come from a Primary Residence roommate. The only acceptable source is from an investment property. A lender will use 75% of the monthly rent, and subtract ownership expenses. The Schedule E of a tax return is used to verify the figures. If a home rented recently, a copy of a current month to month lease is acceptable.

Automobile Allowance and Expense Account Reimbursements - Verified with 2 years tax returns, and reduced by actual expenses listed on the income tax return Schedule C.

Education Expense Reimbursements - Not considered income. Only viewed as slight compensating factor.

Self Employment Income - Lenders are very careful in reviewing self employed borrowers. Two years minimum ownership is necessary, because two years is considered a representative sample. Lenders use a 2 year average monthly income figure from the Adjusted Gross Income on the tax returns. A lender may also add back additional income for depreciation and one time capital expenses. Often self employed borrowers have difficulty qualifying for a mortgage due to large expense write offs. A good solution to this challenge is the No Income Verification Loan. NIV loan programs can be studied in the Mortgage Program section of the library.

• All loans, leases, and credit cards are factored into the debt calculation. Utilities and insurance are not.
• If a loan has less than 10 months remaining, a lender will usually disregard it.
• A revolving account that is billed net 30 days, only uses a $10 monthly payment.
• The minimum monthly payment listed on a credit card bill is the figure used, not the payment made.
• An applicant who co-borrowed for a friend or relative is accountable for the payment. If the applicant can show 6 to 12 months of on time canceled checks from the co-borrowee, the debt will not count.
• Loans can be paid off to qualify for a mortgage, but credit cards cannot.
• A borrower with fewer liabilities is thought to demonstrate superior cash management skills.