It is important to understand how to calculate your income using the same method as the banks will. To clarify there are not 4 weeks in a month! There are 52 weeks in a 12 month calendar year. This makes the average month contain 4.34 weeks. To more accurately compute your monthly gross income you must perform the following calculations:
W2 Wage Earner Example the Paycheck Check:
Pay date 9/21/2009
Pay period beginning 8/03
Pay period ending 8/17
Pay check amount $1404.84
Year-to-Date Gross Income $35,237
Year-to-Date Net Income $26,075.38
To determine your monthly income from your most recent paystub you must first find the pay period ending date. This date is NOT the pay check date. The pay period is usually expressed over a two week period and will be shown in a similar format as shown above.
You now must determine how many months to the percentage of the current month the Year-to-Date Income is has accounted for.
In the pay period expressed above you will perform the following calculations
The pay period ended in September 17. To determine the percentage of September accounted for you take the pay period ending date and divide by 30 (the average days in a month) shown as 17/30 = .56666. This means the pay period end date was .56666 of the month of September. You now take this portion of the month of September (.56666) and add it to the amount of full months already accounted for the year thus far (January through August) which is 8 full months. You now have your year to date months worked as 8.56666
To determine your actual Year-to-Date monthly income you take your full Gross (pre taxed income) of $35,237 and divide this amount by the amount of months to the fraction of the current month determined to be 8.5666. This is expressed as $35,237/8.56666 = $4113.27
Monthly Income calculations Summarized from info above
17/30 = .56666
.56666 + 8 (full months already passed) = 8.56666
$35,237/8.56666 = 4113.27
In preforming your own loan modification it is important to understand how to compute yur income correctly, as it will be needed in creation your financial budget and proposed payment.
Posted by jnrassociates 
