How Does a Reliable Source of Income Affect Buying a Home?

During the homebuying process, you’ll first want to speak with and evaluate mortgage lenders to get a pre-approval letter. This Pre-Approval Letter is what Real Estate Agents (and you) will utilize throughout the search process to make calculated decisions for the type of home you’re looking for and specific locations you may be considering. 

One of the most important elements when considering your pre-approval amount is your reliable source of income (i.e. your occupation). Although W2’s and a solid work history are preferred, every circumstance is unique to the buyer, and it’s always best to communicate honestly and openly with your lender. Regardless, lenders understand that a reliable source of income is pivotal to making monthly payments on your mortgage. Moreover, lenders will generally assign a home appraiser to evaluate the value of the home and “confirm” the amount of loan given to the buyer. In the instance the buyer is choosing to purchase a home over the appraised value, they are welcome to appeal the appraisal or (more commonly) make up the difference in an appraisal gap.

The Bottom Line

So why is your income so valuable? Lenders will typically calculate your debt-to-income ratio (DTI) to determine whether borrowers are reasonably able to take on more debt. Your (DTI) is all your monthly debt payments divided by your gross monthly income. In short, higher reliable income combined with lower debts typically result in a higher pre-approval letter.

Considerations: Article has been modified and adapted from Nerdwallet.com, Rocket Mortgage, Zillow, and Investopedia.

Disclaimer: For Informational Purposes Only. Any and all information by or on this Site is provided for promotional or informational purposes only and is not to be relied upon as a professional opinion. Buyers and Sellers are encouraged to speak with their personal lawyers, accountants, and advisors as to how best the information can be used.