Gross Income vs. Net Income
The first thing to understand is the difference between gross income and net income. Gross income is the total amount of money you earn before any taxes or deductions are taken out. Net income, on the other hand, is the amount of money you take home after taxes and other deductions are taken out.
When calculating your income for an engineer home loan application, lenders will typically look at your gross income. This is because your gross income represents your full earning potential, while your net income only reflects what you actually take home after taxes and deductions.
Types of Income
When calculating your income for an engineer home loan application, it’s important to include all sources of income. This can include:
- Salary or wages from your job
- Bonuses or commissions
- Rental income
- Investment income
- Self-employment income
In addition to these sources of income, lenders may also consider other factors, such as your job stability and the likelihood that your income will continue in the future.
Documentation of Income
When applying for an engineer home loan, you will need to provide documentation of your income. This can include:
- Pay stubs from your employer
- W-2 forms
- Tax returns
- Bank statements
- Profit and loss statements (for self-employed individuals)
Lenders will typically require at least two years’ worth of income documentation to verify your income and calculate your debt-to-income ratio (DTI).