Base Income (Fix Income) from employment is one of the most stable form of income considered for qualifying purpose. In an application borrower is expected to provide details on his employment for most recent two years. A two years employment history can be through one employer or in few scenarios it can be through multiple employers.
When it comes to base income to be used for qualifying purpose, income from current employer is calculated through latest 30 days pay-stub. Pay-stub as asked and documented can be of different pay frequencies. Borrower would be getting paid either Weekly (7 days), Biweekly (14 days), Semi-Monthly (15 days) or Monthly (30 days). Calculation of base income differs accordingly.
Underwriter first do calculate current monthly gross through available pay-stub for given period. Based on pay period start date and end date reported on pay-stub borrower confirms the pay frequencies and accordingly calculate current monthly gross for borrower to be used for qualifying purpose.
Monthly Base income calculation through pay-stub with different frequencies have been summarized below:
- Weekly Pay-stub – Current Base Pay * 52/12
- Bi-weekly Pay-stub – Current Base Pay * 26/12
- Semi-monthly Pay-stub – Current Base Pay * 24/12
- Monthly Pay-stub – Current Base Pay * 12/12
Any pay towards Vacation, Holidays, Leaves reported on pay-stub can be considered as a part and added to the current base pay before arriving at the monthly gross income.
Current gross as calculated is to be supported by Year to date gross (YTD gross) confirming that borrower has been drawing consistent base pay through out the year. YTD gross can be calculated by dividing total YTD base pay by pay period end date reported on pay-stub.
For instance if the end date on pay-stub is 15th September 2015, borrower has received total salary for 8 months and 15 days for 2015 for considered employment. Average monthly gross or YTD gross in given scenario can thus be calculated as:
YTD base pay / 8.5 (8 months 15 days)
Additional days over completed months can be converted to decimals as 15/30 = 0.5
Any YTD pay towards Vacation, Holidays, Leaves reported on pay-stub can be considered as a part and added to the YTD base pay before arriving at the YTD gross income.
If borrower has recently joined considered employment in between current year, YTD period is to be adjusted based on employment start date and pay-stub end date for calculation purpose.