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Old 08-31-2018, 08:41 AM
 
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I understand that mortgage lending utilizes gross income, not net. However, if an employee pays into a mandatory pension (not 401K), does the lender remove that amount from the gross income equation?

For example, a state employer has a mandatory employee contribution of 3% of salary. This contribution is pre-tax.

Would lender say employee makes 70K or 67,900?
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Old 08-31-2018, 08:47 AM
 
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I can't say for certain but it sure seems like the income to be taken into account would be the lower value. You can't use the 3% being mandatorily deducted to pay your current bills, nor can you opt out of the deduction (as you could with, say, a 401k) and your ability to pay your current bills (including the contemplated mortgage) is what the lender will be concerned with.
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Old 08-31-2018, 09:09 AM
 
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Quote:
Originally Posted by turf3 View Post
I can't say for certain but it sure seems like the income to be taken into account would be the lower value. You can't use the 3% being mandatorily deducted to pay your current bills, nor can you opt out of the deduction (as you could with, say, a 401k) and your ability to pay your current bills (including the contemplated mortgage) is what the lender will be concerned with.
Makes sense. I just thought that since technically, the 3% is part of my gross salary, that it would be considered as such since lenders look at gross salary.

I agree with you, though. In this particular case, since it is a cafeteria-type deduction, I suppose it would be negated.
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Old 08-31-2018, 12:37 PM
 
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Quote:
Originally Posted by Eeko156 View Post
I understand that mortgage lending utilizes gross income, not net. However, if an employee pays into a mandatory pension (not 401K), does the lender remove that amount from the gross income equation?

For example, a state employer has a mandatory employee contribution of 3% of salary. This contribution is pre-tax.

Would lender say employee makes 70K or 67,900?
1. No.

2. 70k
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