Income Documentation Calculator
See how much of each income type qualifies for your mortgage. Covers all sources lenders accept — with real shading rules, the 2-year rule, and gross-up for non-taxable income.
Enter your annual amounts for each income source. The calculator applies lender shading rules to show your total qualifying income.
| Income Type | Gross Annual | Shading | Qualifying |
|---|---|---|---|
| W-2 Base | $72,000 | 100% | $72,000 |
| TOTAL | $72,000 | 100.0% | $72,000 |
Lenders apply different qualifying percentages based on income type and stability. Adjust the shading rates for your situation.
| Income Type | Typical Shading | Documentation Required | Notes |
|---|---|---|---|
| W-2 Base Salary | 100% | Pay stubs, W-2, offer letter | Most reliable; fully qualifying |
| Overtime / Shift Diff | 75–100% | 2 years W-2, employer letter | 2-year history required |
| Bonus | 75–100% | 2 years W-2, bonus history | Must be likely to continue |
| Commission | 80–100% | 2 years tax returns + W-2 | Average of 2 years |
| Self-Employed | 100% | 2 years tax returns, P&L, K-1 | Use net income; 2-yr avg |
| Rental Income | 75% | Lease agreement, Schedule E | Vacancy allowance applied |
| Retirement / Pension | 100% | Award letter, bank statements | Must continue 3+ years |
| SSA / Disability | 100% (125% gross-up) | Award letter, 1099-SSA | Gross-up if non-taxable |
| Alimony | 100% | Divorce decree, 6 mo bank stmts | 6+ months must remain |
| Child Support | 100% (125% gross-up) | Court order, 12 mo history | 3+ years must remain |
Non-taxable income (SSA, disability, child support) can be grossed up by 25% by lenders, boosting your qualifying income. This reflects the fact that untaxed dollars go further.
How to Use This Income Documentation Calculator
Enter your annual gross amount for each income source you receive. The calculator automatically applies the lender shading rules used by Fannie Mae, Freddie Mac, and FHA underwriters — showing you exactly how much of each income type counts toward your qualifying income. The result is your total annual and monthly qualifying income, which you can then compare against the 36% DTI and 43% DTI mortgage payment limits.
Use the Advanced tier to adjust shading percentages for variable income types (overtime, bonus, commission) and to see the 2-year rule and declining income rule in action. The Pro tier covers income gross-up for non-taxable income, self-employed add-backs, and seasonal income averaging.
How Lenders Calculate Qualifying Income
Qualifying income is not the same as gross income. Lenders apply specific rules to each income type to determine how much they will credit toward your debt-to-income ratio. The key principle is stability and continuance — lenders only count income they believe will continue for at least 3 years.
Monthly Qualifying = Annual Qualifying / 12
Max Monthly Housing (36% DTI) = Monthly Qualifying × 0.36
Max Monthly Housing (43% DTI) = Monthly Qualifying × 0.43
The shading percentage represents what fraction of a given income type lenders will credit. W-2 base salary counts at 100%. Rental income counts at 75% (vacancy allowance). Overtime and bonuses typically count at 75% without a strong history, and up to 100% with documented stability.
Example: The Garcia Family Income Calculation
Combined Income Sources
| W-2 Base Salary (Maria) | $65,000/yr | 100% = $65,000 |
| Overtime (Maria, 2-yr history) | $8,000/yr | 75% = $6,000 |
| Self-Employed Net (Carlos, Schedule C) | $52,000/yr | 100% (2-yr avg) = $52,000 |
| Rental Income (one unit) | $18,000/yr | 75% = $13,500 |
| Total Gross Income | $143,000 | |
| Total Qualifying Income | $136,500/yr ($11,375/mo) | |
| Max Housing at 43% DTI | $4,891/mo |
Even though their gross income is $143,000, only $136,500 qualifies — because the overtime is shaded at 75% and rental income at 75%. Carlos's self-employment income qualifies at 100% because he has a 2-year average from Schedule C.
Income Type Rules at a Glance
Here is a summary of the most important qualifying rules for each income type:
- W-2 Base Salary: 100% qualifying. Most reliable income type. Verified with pay stubs and W-2s.
- Overtime & Bonus: Requires 2-year history on W-2s. Shaded 75–100%. Employer letter confirming continuance strengthens the file.
- Commission: 2-year W-2 history required. Shaded 80–100%. If commission exceeds 25% of income, self-employed rules may apply.
- Self-Employed: Strict 2-year requirement using Schedule C or K-1. Lender uses net income, not gross revenue. Add-backs (depreciation, etc.) can increase the qualifying amount.
- Rental Income: 75% of gross rent from Schedule E (or signed lease + appraisal for new rentals). Negative rental income from Schedule E is added to monthly debts.
- Retirement & Pension: 100% if expected to continue 3+ years from closing date. Documented with award letter or 1099-R.
- Social Security: 100% qualifying. If non-taxable, can be grossed up to 125%. Documented with SSA award letter.
- Alimony Received: 100% qualifying if 6+ months of payments remain per divorce decree. Verified with bank statements showing receipt.
- Child Support: 100% qualifying (125% if non-taxable) if 3+ years remain per court order. 12 months of payment history required.