15 Steps to Homeownership: 3. Income

Next Module: Step 3 – Getting Your Income Up to the Mark

Course Title: The Power of Ownership™: Easy Steps to Smart Homebuying

STEP 3: Getting Your Income Up to the Mark

1. COURSE OVERVIEW

Income is the backbone of your homebuying power. Without sufficient, verifiable, and reliable income, even great credit and savings won’t lead to mortgage approval. Step 3 in this journey helps participants understand how lenders evaluate income, what income counts, how to organize it for underwriting, and how to increase it strategically.

This module breaks down the components of qualifying income, guides participants in calculating their debt-to-income (DTI) ratio, and explains the nuances of W-2, 1099, and self-employment income. It also explores legal, ethical strategies for improving income—including side hustles and passive revenue streams. Most importantly, it helps participants avoid common financial behaviors that disqualify borrowers and provides a biblically sound approach to managing and reporting income.

1. LEARNING OBJECTIVES

By the end of this step, participants will:

• Understand what types of income are considered mortgage-eligible.
• Calculate and evaluate their own debt-to-income (DTI) ratio.
• Distinguish between gross vs. net income.
• Identify additional sources of income that may qualify.
• Learn documentation required for different income types.
• Plan how to increase income or reduce qualifying debt.
• Prepare a lender-ready income profile.

III. SCRIPTURAL FOUNDATION

Deuteronomy 8:18 (NIV) – “But remember the Lord your God, for it is he who gives you the ability to produce wealth.”

Proverbs 13:11 (NLT) – “Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows over time.”

Your income is not just a number—it is a measure of stewardship, consistency, and discipline. God gives us the ability to earn, but wisdom dictates how we grow and manage it.

1. QUOTE TO INSPIRE

“If your income is not enough to fund your future, it’s not just a problem—it’s a priority.” — Coach Greb

1. KEY STATISTICS

Income Factor	Data Point	Source
Minimum income needed to afford a $250K home (at 6.5%)	$66,000	Bankrate, 2023
Average DTI ratio of denied mortgage applicants	45%	Urban Institute, 2022
Percentage of Americans with side income	42%	Pew Research, 2023
Self-employed mortgage denial rate	3x higher than W-2 workers	Mortgage News Daily, 2022

1. COURSE CONTENT & TEACHING OUTLINE
2. What Counts as Qualifying Income?

• W-2 Salary: Base income, bonuses, and overtime (with 2-year history)
• Self-Employment: Requires 2 years of returns, P&L statements
• 1099 Contractors: May require averaging income over 24 months
• Rental Income: Must be documented with leases, deposits
• Alimony/Child Support: Must continue for at least 36 months and be documented
• Passive Income: Must be stable, consistent, and verifiable

2. Gross vs. Net Income

Gross Income: Income before taxes and deductions
Net Income: Take-home pay after taxes
Note: Lenders use gross income to calculate DTI.

3. Calculating Debt-to-Income Ratio (DTI)

DTI Formula:

Example:

Description	Amount
Gross Monthly Income	$5,500
Monthly Debt	$1,925
DTI	35%

Lender Benchmarks:

• Conventional Loan Target: < 36%
• FHA Loan Limit: < 43%
• Above 45% often requires compensating factors (e.g., high credit score, assets)

4. Increasing Income Ethically

Short-Term Strategies:

• Part-time job or overtime (with documented consistency)
• Deliveries, rideshare, gig apps (with bank deposits and logs)
• Rent out a room or storage space

Long-Term Strategies:

• Certifications (IT, real estate, health)
• Launch a side hustle with low overhead
• Monetize skills (tutoring, editing, coaching, baking)

Faith-Based Guidance:

Avoid shortcuts or dishonest gain. Document everything. Honor the source of your provision.

5. Reducing Qualifying Debt

Qualifying Debt Includes:

• Auto loans, credit cards, student loans, personal loans, alimony

Not Counted:

• Cell phone, car insurance, utility bills, daycare (unless court ordered)

Debt Reduction Methods:

• Snowball: smallest balance first
• Avalanche: highest interest first
• Debt consolidation (if lowers payment without new defaults)

VII. CASE STUDY: Elijah and Amanda

Elijah was self-employed as a graphic designer earning $70,000/year, while Amanda earned $45,000/year at her job. Their DTI was too high at 48%. The lender was skeptical of Elijah’s irregular income and Amanda’s credit score was 620.

What they did:

• Amanda paid down her auto loan to reduce monthly debt
• Elijah documented all payments and created a P&L report verified by a CPA
• They paused new debts for 6 months
• Amanda started a tutoring gig adding $300/month documented side income

Results:

• DTI dropped to 39%
• Credit score increased to 675
• They were approved for a $310,000 FHA loan with 3.5% down

VIII. DO’S AND DON’TS

✅ DO:

• Track all income and categorize it (W-2, 1099, passive)
• Save all bank deposits and income logs
• Use consistent sources of income and document them
• Plan debt payments strategically to lower DTI

❌ DON’T:

• Count inconsistent income unless proven for 24 months
• Change jobs during the loan process (unless it’s upward and in same field)
• Rely on cash income not deposited in bank
• Open new debt without lender approval

1. PRACTICE EXERCISES
2. Income Categorization Table

Source	Type	Monthly Avg.	Verifiable?
Employer Job	W-2	$4,200	✔️
Uber	1099	$600	✔️
Rental	Passive	$850	✔️
Cash Babysitting	N/A	$300	❌

2. DTI Calculation Worksheet

• Monthly Gross Income: ___________
• Total Monthly Debt: ___________
• DTI = ___________ %

3. Action Plan

• What income can you increase?
• What debt can you reduce?
• What documents do you need to collect?

4. Faith Reflection

• How are you honoring God with your income?
• What adjustments will you make this month?

1. TEACHER’S MANUAL SNAPSHOT

Session Goals:

• Help learners calculate and improve their DTI
• Clarify income documentation for all employment types
• Emphasize biblical work ethic and wisdom

Activities:

• DTI workshop in small groups
• Roleplay: Self-employed applicant explaining income
• Guest Q&A with a mortgage underwriter (optional)

Tools Needed:

• Calculators
• Income verification checklists
• Budget sheets

1. PARTICIPANT GUIDE SUMMARY

Included Worksheets:

• DTI calculator
• Income source planner
• Debt prioritization worksheet

Weekly Tasks:

• Calculate your current DTI
• Identify one income-boosting action
• Set a debt-reduction target

Reflection:

• What mindset shift must you make around income?
• What does God expect from you in stewardship?

XII. CONCLUSION

Income is not just about earning—it’s about proving, planning, and positioning. If you can demonstrate that you manage your income wisely, lenders will trust you with a mortgage. More importantly, God can trust you with increase.

Scripture Reminder: “Whoever can be trusted with very little can also be trusted with much.” — Luke 16:10

Let your stewardship now lay the foundation for your home later.