What does "gross income" refer to in the context of loan qualification?

In the context of loan qualification, "gross income" refers to income before taxes are deducted. This is the total income that a borrower earns from all sources, including salary, wages, bonuses, rental income, and other earnings, without taking into account any deductions for taxes or expenses. Lenders typically analyze a borrower’s gross income when determining the ability to repay a loan, as it provides a complete picture of the borrower's financial capacity prior to any tax liabilities.

Using gross income helps lenders to understand the borrower's financial situation more comprehensively, as it reflects the total earnings available before any deductions. This metric is critical in the calculation of the debt-to-income ratio, which is an essential factor in assessing creditworthiness and loan eligibility.