How Variable Income Impacts Buying Power

Types of Variable Income 

Variable income typically falls into four categories:

  1. Commissions

If you are in a sales position, it is likely that in addition to your salary you also earn commission on your personal sales.

  1. Bonuses

Many employers offer bonuses based on the amount of time you have worked for them. Some employers even give bonuses every year at Christmas time.

  1. Tips 

Many industries allow tipping or gratuity as a way for the customer to express their thanks to the employees who served them. In the restaurant industry, servers often make the bulk of their income on tips.

  1. Overtime

Hourly employees typically earn a higher pay rate for every hour worked over forty. In some industries overtime can be a significant source of extra income.

How does variable income affect your buying power? 

If your variable income is significant, it can have a big impact on how much house you can afford. 

When you bring me records of all of your sources of income, I am first going to look at your base pay. Then I am going to look separately at your tip income, your bonus income, your commission income and your overtime income. I will add those together and then do a 2 year average on that income. 

Now let’s say that you were in one sales position for 1.5 years. Then you take on another position in the same line of work, and you are still earning commission. You don’t have to be on the same job for 2 years. I just need a 2 year history of your variable income.

Your regular income plus the two year average of variable income helps us determine how much you qualify for. I can use that average the same way I use your salary. Including your extra income will qualify you for a bigger mortgage.

For information on types of mortgages and how you qualify, read Understanding Various Home Loan Programs

Still have questions? Give me a call today. I am happy to walk you through the process. (303) 818-0699

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