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What is Gross Income?

October 28, 2016 by jWeb Media

Whether you’re purchasing your first home or your second, lenders will look at your income to determine if you can afford a Kansas City home loan. Namely, they will analyze your gross income, or the income you make before taxes and deductions are made. As a home owner, here is what gross income means for you:

Determines Loan Eligibility

One of the main ways you will use your gross income is when you are purchasing a home. When you go into your local mortgage lender, they will analyze your loan eligibility by taking your gross income into consideration, among other factors.

Lenders won’t let you borrow more than 28% of your gross income when they check whether or not you’re eligible for a loan. That way, you can avoid paying off a loan you cannot afford in the long run.

Calculates Debt-to-Income Ratios

Your gross income will also help you calculate your debt-to-income ratios in order for you to determine your budget and expenses. By using your gross income to calculate your debt-to-income ratios, you can give yourself an idea of how much house you can realistically afford.

Determines Tax Liability

When it comes to your taxes, gross income is considered total income so taxes can be properly prepared and filed. It also determines your tax liability for all of your earned income. Remember, gross income is not your earned income. Earned income only includes income from:

  • Wages earned
  • Commissions
  • Bonuses

Determines Disposable & Discretionary Incomes

Finally, your gross income helps define your disposable and discretionary incomes, which is also an important factor in being able to afford your home loans. Here, your gross income is calculated into your disposable income, or your gross income after taxes, which in turn calculates your discretionary income

If you ever have any questions about how your income affects your ability to get a home loan or manage your monthly mortgage payments, talk to your lender and financial advisor. They will help you through the process and make sure you are making informed financial decisions.

Find More Home Loan Tips on Our Blog

Filed Under: Blog, Mortgage Rates Tagged With: gross income, kansas city home loans

The information provided on these posts have been prepared by a third party company and have been distributed for education purposes only. The positions, strategies or opinions of the authors do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax adviser for full eligibility requirements on tax deduction.

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© 2018 · Cornerstone Mortage, Inc · Sitemap ·
Guild Mortgage Company is an Equal Housing Lender; Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act. OR ML-176;Georgia Residential Mortgage Licensee; GA #6268; NV Banker #1076/NV Broker #1141; AZ BK #0018883; Licensed by the Mississippi Department of Banking and Consumer Finance. Illinois Residential Mortgage Licensee. Kansas Licensed Mortgage Company. Rhode Island Licensed Lender. Licensed by the New Hampshire Banking Department. http://www.nmlsconsumeraccess.org/ Company NMLS ID 3274. All information, loan programs & interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction. Guild Mortgage Company is an Equal Opportunity Employer. Guild Mortgage Company 5898 Copley Drive San Diego, CA 92111 |State of Missouri Principal Location: 11730 Fenpark Drive, Suite 1003, Fenton, MO 63026.Brought to you by Jweb Media.

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