Mortgage Minute - Debt to Income Ratios and Income Calculations - Only the UW Opinion Matters

This episode is brought to you by Equity Multiple. Dedicated to assisting physicians in simplifying their investment journey, Equity Multiple enables passive investment in vetted, professionally managed commercial real estate. Learn more at www.equitymultiple.com. Today Doug Crouse dives into debt-to-income calculations. For those with a straightforward employment contract and a base income, it's fairly simple. However, sign-on and quarterly bonuses typically don't count unless you have a two-year history. For 1099 income, if you have a set hourly rate, it's easy to calculate, similar to W-2 borrowers. But if your 1099 income is variable, a two-year history is required. Most lenders cap debt-to-income ratios at 43-45%, and for doctor loans, mine is set at 45%. This ratio is based on gross income minus items on your credit report, such as car payments, student loan payments, and credit card minimums, but excludes health insurance, daycare, and utilities. For example, with a $20,000 monthly income, 45% is $9,000. Subtract $1,000 for debt payments, leaving $8,000 for your maximum mortgage payment. For complex income situations, it's crucial to consult with an underwriter for an accurate assessment. Even with my 25 years of experience, only an underwriter's evaluation counts. So, always get a full loan pre-approval before house hunting, especially if your income isn't straightforward. If you have questions, Doug is available at DougCrouse.com