If I am self employed what income number do I use for my gross monthly income in the mortgage qualification calculator?

A person is considered self employed in the mortgage industry if they own more than 25% of the company they work for or they are paid as an independent contractor.  A self employed borrower’s income is calculated by taking a two year average of the borrowers’ net income plus depreciation if they own the business and it has an expense for depreciation.  The paperwork hurdles may be higher for self employed borrowers, they will almost always have to supply their last two years of personal tax returns and business tax returns if their income is derived from a corporation that files its own tax returns.  The data to input in the mortgage calculator is the same for any other borrower.  One issue that comes up moderately frequently with self employed borrowers is that the monthly gross income used to qualify and that should be used for the mortgage calculator is a two year average of net income.  A standard salaried or hourly wage worker would be qualified on their most current income level, not an average.  For all the mortgage calculators, if you are self employed take the last 24 month of net income plus depreciation and divide by 24 to obtain the monthly average to use as the monthly gross income figure

This entry was posted on Wednesday, December 10th, 2008 at 10:41 pm and is filed under Mortgage FAQs. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.