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Loan Officers and Mortgage Loan Officers
Getting pre-qualified for a home loan involves a number of different factors. One of the most important things that you will go through is an analysis of your income. In order to figure out how much mortgage you can afford and determine your worthiness, lenders and their mortgage loan officers have their own ways of looking at your income. After picking out a home, these are things that you will need to be prepared for in the home loan process.
The most important thing to remember is that lenders will only give credit for things that they can legally document. Money that was earned without paperwork might be fine for your purposes, but it won´t satisfy the loan officer when he sits down to determine a final number. That´s why, if you are planning on shopping for mortgage loans in the near future, you must ensure that every dollar you earn is documented with a certifiable paper trail.
Mortgage Loan Officers Use Simple Formulas
For folks earning a salary, mortgage loan officers use a pretty simple formula for determining your income. It is also important that you know this number in order to use a mortgage calculator to come up with an original figure on how much loan you can afford. Take your paycheck and multiply the amount earned by the number of pay periods that you have every year. From there, you can divide by twelve to figure out the monthly income that lenders will use to determine your loan. This works for most salaried employees, although there are different rules for teachers that accommodate for their strange schedules.
Hourly employees have to use a different calculation. For hourly employees, the hourly rate earned should be multiplied by 40, and then multiplied by 52, before dividing by twelve. This will give the amount earned each month for the purpose of securing a home loan. The problem occurs with overtime, special bonuses, or any commission that you earn.
Mortgage Loan Officers Look At The Total Package
Unfortunately for some people, home loans aren´t granted on the basis of what you are earning right now. Lenders take a look at your income from all the extra sources over a two year period, and then add that to your calculated income. This can sometimes mean that lenders will shortchange what you are currently making. They do so for stability´s sake, though.
Teachers, nurses, and seasonal employees have to use a different system. Lenders take the W2 forms of those individuals over a two year period and divide by 24 in order to come up with a monthly income number. If you are interested in figuring out your own monthly income for the purposes of being prepared for a meeting with a loan officer, then using that formula will get you close to their actual calculation.
Mortgage lenders are looking to protect themselves as much as possible, so their calculations might undercut you a little bit. In order to make sure that you are treated fairly on this front, have documentation for every dollar that you earn. Make sure that the lender understands your situation to the fullest.