25 Mar 2022

What Is Annual Net Income?

Annual Net Income

When lenders evaluate a home loan application, they evaluate several elements. In addition, they apply several lenders’ ratios. The goal is to find out if the homebuyer’s finances can handle the new debt. 

Annual net income is the income left after an employer subtracts taxes and fees from the individual’s paycheck. Employers must pay payroll taxes per employee. Thereafter, employers make withholdings based on the employee’s situation. For example, some employees ask their employer to withdraw funds for retirement.

Although an employee earns $100,000 annually, their take-home pay might only result in $80,000 annually. The amount left after all withholdings results in annual net income.

Lenders prefer to work with an applicant’s net income since part of the gross is already spoken for by the government and retirement accounts.

Mortgage House provides online tools to help homebuyers understand how net income impacts the potential loan terms. It also affords them a more realistic view of their finances. The same logic applies when an individual decides to obtain a car loan. Even though a vehicle requires less financing than a residential property, lenders still execute the same income verification process. 

Our loan specialists at Mortgage House have an array of tools to help them accurately evaluate all home loan applications. Then, they can find competitive loan terms for most homebuyers. 

Annual Net Income Conclusion

Lenders look at a mortgage applicant’s annual net income to understand if they can repay the new debt. Mortgage House loan specialists help homebuyers understand the process and position them for financial success. Contact our team today.

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