Death in the family, illness, loss of a job, or divorce can take a great toll on our daily lives and finances. If tragedy strikes and you are unable to afford your monthly mortgage payments and find yourself falling behind, you may be able to modify your home loan to catch up and avoid foreclosure.
What is Gross Income?
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.
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
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.