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The author, Jennifer Sisson.
My husband and I are looking at houses to buy, but we both have variable income.
We were pleasantly surprised by the mortgage we’re eligible for, but we still need to plan ahead.
The biggest variables we can control are the houses we look at and our down payment.
In my small town of Paducah, Texas, new trucks cost more than most of the homes for sale. (Yes, this is in 2023, and no, I’m not exaggerating.) So you can imagine the sticker shock I experienced when we moved to Salt Lake City, Utah, where the median home price is currently over $600,000.
Salt Lake has experienced double-digit year-over-year price growth during the pandemic, so houses are literally 10 times more here than they were in Texas. We’ve been renting for a while to get the lay of the land, but now my husband and I are in the market to own a home again.
Aside from the question of affordability, we have a wild card in our househunting game: Both my husband and I have variable incomes.
This isn’t completely new to us. I’ve been a freelance writer for the past four years, so my income has fluctuated as clients have come and gone. But my husband has always been our family’s primary breadwinner with a salaried wildlife biologist job.
Since we moved, he transitioned to a sales job for a tree care company, so a good chunk of his compensation is now commission-based. The work is seasonal (nobody wants their trees pruned in the dead of winter), so our income is even less predictable.
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Qualifying for a mortgage with two variable incomes
Once the dust had settled from the move, we called a lender to see if we could get preapproval for a mortgage. I was nervous. I thought that lenders wouldn’t consider us if we didn’t have two years of history in the same job; he’d only been working there for six months. We both had great credit scores, and my freelancing business had a long track record, but in Salt Lake, my income wouldn’t be enough to qualify us for more than a doghouse.
I was surprised that the lack of longevity in my husband’s job didn’t hurt us much, but the lender counted only his base salary toward our income, as we weren’t sure how much my husband would regularly make in commissions. Between my husband’s base salary, my freelancing income, and the rent from our two investment properties, we qualified for thousands more than I’d imagined. However, it was still less than most houses in our area were selling for.
But when we did the math on monthly payments for the amount the lender told us, we balked. Neither of us was comfortable with devoting that much of our income to a mortgage every month, even though we’d struggle to find a house at that price. We’d have little room for anything else.
Reverse-engineering our monthly payment
Discouraged but determined, we decided to think of this real-life math problem another way. We came up with what we could reasonably expect to make each month in income between my freelance earnings, my husband’s base salary, and commissions.
We then decided how much of that income we were comfortable devoting to a mortgage payment (including insurance and taxes). Our number was in line with expert recommendations.
Since our credit was already in good shape, we couldn’t do much to influence the interest rate except shop around for the best deal. We’re on the hunt for an assumable mortgage with a low interest rate, but those are rare.
Home prices in the area remain high, but we are looking at houses that have the potential for additional income or sweat equity. Listings with unfinished basements and accessory dwelling units get us really excited. We’ve also considered waiting a few years until our oldest son is out of the house so we can purchase a home with fewer bedrooms.
Our down payment was the variable over which we had the most control. When toying with the numbers, we realized that a larger down payment dropped our monthly mortgage amount significantly. So we’ve decided to sell our two rental properties to have a larger down payment and a lower monthly payment.
We remain on the hunt for the perfect house and interest rate, but we are more certain now about how much house we can afford despite the fluctuation in our incomes. We may play with the monthly payment number in the future if our incomes increase reliably, but for now, we plan to rely on our calculations to ensure we don’t make ourselves house poor.