When you enter your income, it’s important you understand that it be as accurate as possible. Simply entering last year’s gross annual income will not do unless you are on an annual salary. If you are paid on an hourly basis, multiply your current hourly wage by 173.32 and change the pay period to monthly. If you have overtime, are on commission, or also earn bonuses, please use the following instructions before you enter your monthly total.
Overtime calculations: If you have been earning overtime, it will only be counted if a) you have been receiving overtime for a period of at least 1 1/2 years; b) you have been earning overtime for at least one year and your employer will be willing to write a letter stating that overtime is expected as an ongoing condition of employment. To calculate overtime, add all overtime received and divide by the number of months you have been receiving it. Add this figure to the base hourly figure you calculated above and enter this as your monthly income.
Commission income and bonuses: Use the same arguments and procedures listed for overtime.
Part-Time Employment: Unless you have demonstrated a willingness to work a second job for approximately two years and have generated a consistent income from that employment, don’t include it in your calculations.
Self-Employment: Unless you have been self-employed for at least two years, do not include that income in your calculations. If you have been in business for two years, use your average (taxable) monthly income over the past 24 months. If you reported depreciation on your income tax forms, you can add that back onto your income calculations.
Add all monthly installment loan payments (those with uniform monthly payments), court ordered alimony and/or child support, as well as minimum required payments on revolving credit lines.
This is an important field that should include any and all liquid assist you intend to use to cover a down payment, closing costs, pre-paids and reserves. This will include checking, savings, proceeds from the sale of a home
While the factor used in this calculator is a little high for most of the Las Vegas area, I don’t recommend you change it. Best to overestimate then you won’t be disappointed.
The interest rate you enter will have little effect on your purchasing power unless you are interested in an adjustable rate mortgage. In that event purchasing power increases approximately 7.5% for every full percentage point below the par rate on a 30 year fixed rate mortgage. For arguments sake I recommend you use 6% as a benchmark for 30 years conventional fixed rate financing. This assumes that you are paying zero points-no origination or discount fee.
While you can use 10, 15, 20, 25 and 30 years, the most popular term is 30 years because it affords the most favorable payment schedule.
Call me toll free of e-mail me and I will help you get the information you need. Thank you for visiting my Las Vegas Nevada loan information page.
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