What Is Gross Monthly Income?
Gross Monthly Income: Your income before taxes and deductions, which lenders use to qualify you.
Gross monthly income is what you earn each month before taxes, retirement contributions, health insurance and other deductions. Lenders use it, not take-home pay, to calculate your debt-to-income ratio.
How lenders count it
- Salary: annual salary ÷ 12.
- Hourly: hourly rate × typical weekly hours × 52 ÷ 12.
- Overtime, bonus and commission: usually averaged over two years, and must be likely to continue.
- Self-employed: the two-year average of net business income from tax returns, after expenses, not gross revenue.
- Other: Social Security, pensions, disability, alimony and child support with enough remaining duration, and rental income.
Some non-taxable income, like Social Security in many cases, can be "grossed up" by up to 25%, because it isn't taxed.
Good to know
Writing off a lot of business expenses lowers taxable income, and also lowers qualifying income. Self-employed borrowers sometimes use a bank statement loan instead.