Another type of income is contract labor and/or temporary work income. In these situations, borrowers are likely to have income that varies wildly throughout the year, i.e, they make a lot of money some months and very little in others. This can look bad at first, but borrowers who keep meticulous records of their jobs and income can get a loan easily in this situation , assuming that they make enough money overall to pay their bills. However, some contract laborers end up getting government unemployment assistance at some point in their lives. This might be due to seasonal work or the closure of a business that was once a reliable employer. This also looks bad at the start, but if the borrower can prove that it was only temporary and they got off unemployment in a relatively short amount of time, the lender should be fine with the loan. As always, the lender is simply looking to make sure the borrower is likely to be able to pay his/ her bills in the future, and can be flexible. Finally, yet another form of income is bonus income. This is usually the kind of income people who work sales jobs rely on. In some situations, salespeople will make a small weekly salary that is barely enough to live on, but make the bulk of their money from commissions. This puts them in the same situation as the contract laborers, with their income varying all over the year. As before, the lender is going to want to see at least two years of consistent income from a borrower in this situation .
THE DEBT-TO-INCOME RATIO
A quality lender will take a borrower’s debt-to-income ratio very seriously. The debt-to-income ratio is a mathematical calculation of how much a person earns in his/her total pre-tax monthly income.
For example, let’s assume a borrower has a $1500 mortgage, a
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