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Calculation of Monthly Repayment Income From Primary Employment: The following table will assist lenders in calculating base earnings from primary employment paid on an hourly, weekly, every two weeks, semi-monthly or monthly basis to qualify the applicant. The guide will not be applicable in all situations. The lender remains responsible for determining the amount of income used to qualify the applicant is stable. A written analysis of the income used to qualify the applicant must be retained in the mortgage loan file. Documentation must support the lender’s income calculation.
Calculation of Monthly Repayment Income – Base Earnings | |
Frequency | Calculation of Repayment Income |
Hourly | Multiply the hourly pay rate by the average number of hours worked per week; multiply by 52 weeks; divide by 12 months. |
Weekly | Multiply the weekly income by 52 weeks; divide by 12 months. |
Every two weeks | Multiply the two weeks income by 26 pay periods; divide by 12 months. |
Twice per month | Multiply the semi-monthly income by 24 pay periods; divide by 12 months. |
Monthly | Use the monthly income from the paystub. Multiply by 12 months. |
Applicants who are paid less than 12 months per year | Annual salaries may be received over a time period of less than 12 months. Determine how often; how long the applicant is paid. Utilize the monthly income based upon calculations above. Example - divide an annual salary paid 10 months of the year by 12 to arrive at the average monthly income. |
Additional Income: Procedures for treating other acceptable income sources in addition to primary employment are described below. The lender must determine that the amount of additional income used to qualify the applicant is likely to continue at the level used for loan qualifying. The monthly income documented in the mortgage file must support the lender’s income calculation. A written analysis of the additional income used to qualify the applicant must be retained in the lender’s mortgage file.
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