AGI vs SAM Income Calculation Methods

One great thing about being involved with UberWriter is the chance to discuss different topics with mortgage professionals from different positions and companies.  This allows quite a variety of questions and opinions to be shared.  One question that does come up is “Does UberWriter use the AGI (Adjusted Gross Income) or SAM (Schedule Analysis Method) for income determination”
The short answer is UberWriter uses SAM, just because it is most practical for income calculations to meet guidelines. If you have followed the blogs you know I will always explain not only the “what” but the “why” and “how” as well!

If you google SAM method you will find lots of search results (only a few are mortgage related), but if you google AGI nothing comes up for mortgage income calculations.  You will get hundreds of results of tax related articles talking about what is AGI versus your gross income for tax purposes.

Why is there a lack of information on AGI? Doing your income analysis with AGI, to me, is a big waste of time.  I was trained on how to do the AGI income method in underwriting classes and to date, I might have used this method five times out of the tens of thousands of underwritten loans I have done.

Here is the easiest way to explain the difference between these  income calculation methods and why SAM is so dominant. Both incomes require you to start with 1040s’ in mind, most of the time the borrower will be self employed or have income not generated from an employer (W-2 / Paystubs in other words).

AGI method says “Take the borrowers total income shown on the 1040’s and remove (Adjust) the ending gross income”.  This method requires to you “prove” why you are NOT using every single income on the tax return.  So if you have a borrower that you just want to use the schedule C income for here is what has to happen.  First start with line 22 on the 1040 (Total Income) and fill out the entire income analysis form and subtract anything except the Schedule C.  That means you have to go through the form and subtract examples like spouse’s W-2, interest, dividend, social security, and any other box filled out between lines 1 and 22 and subtract them to “isolate” the Schedule C income you want to use.

See what I mean, what a waste of time!

SAM method says
“Start with $0 and ONLY add on the income (Schedules) of income you want”. Plain and simple compare to AGI.  With the SAM method you would only add on the income that you had the correct documents to support and knew the income met the rest of the qualifications outlined for use in the guidelines.

As you can imagine staring with $0 and adding on qualified income is better than staring with $100,000 and being required to keep removing income because it did not qualify or you could not document it properly.

I hope this helps you answer the age old AGI vs SAM question and you continue to find out blogs informative and helpful in 2019!

By |2019-01-09T20:52:00+00:00January 9th, 2019|Uncategorized|0 Comments

About the Author:

Michael Whitbeck
Michael is a subject matter expert on the process of mortgage underwriting. With 25 years in the mortgage business holding different positions in his career such as loan officer, underwriting manager, auditing supervisor, and chief credit officer. Through those experiences, he continually built content and systems to teach a process to improve people's underwriting skill set. Michael is the co-creator of UberWriter. UberWriter is the only online mortgage calculator that can determine any of the 30+ types of income listed in the agency guidelines. UberWriter has been a huge success in the market and half of the top 10 companies on the Scotsman Guide use UberWriter and produce thousands of income reports per month. Outside of the mortgage world Michael is a recreational pilot, loves Jeep adventures with his wife Jennifer. As a military veteran himself, he helps out with veterans organizations.

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