What is Year To Date income or YTD income? In short, it is how much you have earned so far this year until today. It is also called YTD earnings or gross pay YTD.
Below, you will learn how to use a Year to Date Income Calculator (or YTD Income Calculator) or how to compute for your YTD earnings.
Your year-to-date income or year-to-date earnings is the amount of money you have earned from the beginning of the year starting January 1st, to the current date. This number typically appears on your pay stub but can be calculated from your paycheck as well.
Lenders use this calculation to determine the annualized monthly income and calculate your debt-to-income ratio.
For example, let’s say you are calculating your YTD income at the end of March. In other words, the current date is March 31st.
For salaried employees that get paid twice a month or every two weeks, you can calculate your year-to-date income by knowing your annual salary. Divide your yearly income by the number of pay periods. For example, if you get paid twice a month, then there are 24 pay periods in a year. If you make $50,000 per year, your gross earnings per pay period are approximately $2,083 or $50,000 divided by 24.
Now, multiply your earnings per pay period by the number of pay periods until the current date. Assuming that there are six total pay periods until March 31st, $2,083 multiped by 6 is $12,498. As a result, your year-to-date gross income is approximately $12,498.
For hourly employees who work 40 hours per week, you can calculate your year-to-date by knowing your hourly salary.
First, calculate how much you earn per pay period. You can do this by multiplying your hourly wage by 40 hours. Then, multiply that amount by the number of hours in a pay period.
For example, if you earn $20 per hour and work 40 hours per week, you would make $800 per week. If you are paid every two weeks, $800 times two means that you make $1,600 in one pay period.
Assuming that there are six pay periods from January 1st until March 31st, $1,600 times six is $9,600. Your year-to-date gross income is $9,600.
Unfortunately, seasonal employees, part-time income, freelancers, and self-employed borrowers must calculate their income differently. Their year-to-date earnings are usually derived from an average of the last 24 months before determining the year-to-date amount.
Similarly, including overtime, bonuses, or commissions to your income is a bit more complicated. Lenders typically only count income that they can document through appropriate paperwork. All additional income is subject to different approval standards.
Lenders want your recent pay stubs to calculate your year-to-date income for several reasons.
First, underwriters want to see that you are still currently employed.
Next, lenders want to verify that your current paystub and year-to-date income aligns with the previous years’ salaries. For example, if a borrower claims that they have received a salary of $100,000 for the past two years, but their year-to-date pay in June is only $10,000, these inconsistencies must be explained.
Third, lenders use your income to determine if you can afford the monthly payments. They evaluate this through a debt-to-income ratio to determine how risky you are to default on your home loan.