Learn All About DESC Monthly Income
Sorting through the different types of income that you need to report for specific institutions can be time consuming, especially when you have little free time between working and caring for your children. When you know which type of income is used for different scenarios, including re-financing a mortgage, renting a home or apartment and paying student loans, you will be a step ahead in the process.
What is DESC Monthly Income?
Discretionary (DESC) income is used in determining qualification for some loans. Discretionary income is your gross monthly income minus all of your critical, personal expenses and taxes. Your critical personal expenses are the things you must have every month, such as shelter, food, clothing, medications and transportation. The amount of money you have after paying these monthly expenses is your DESC income. You'll likely spend this portion of your income on items like eating out at restaurants, vacations or any other goods and services that aren’t critical, as well as for savings and investments.
What is The Difference between Discretionary and Disposable Income?
Some people confuse the two terms discretionary and disposable income. Disposable income is all of your income after taxes, representing your take-home pay. Disposable income can be used for discretionary (unavoidable costs of living) and non-discretionary (non-essential) costs. Disposable income may be referred to as your disposable personal income (DPI). Your DPI is a larger figure than your DESC income.
DESC income is used when applying for loans of many types including auto loans, home refinancing, securing a home or apartment to rent or lease and paying student loans.
Economists most often use DPI income to gauge the health of an economy. When DPI levels rise, families have more money to save money or purchase goods that are non-essential. This gauge tracks average household spending and saving rates to determine if the economy is rising or falling.
Is Your Gross Monthly Income After Taxes?
Mortgage lenders use your gross monthly income, debt and other factors to determine mortgage loan approval. Your gross monthly income is the total amount of income you earn—whether as an employee, a contractor or from your own business—before any taxes, insurance premiums or other expenses are taken out. Your paycheck stub states gross earnings, then lists all the items deducted from your gross income to arrive at your net income. These expenses include a number of taxes like federal and state income taxes (which vary depending on how much you earn) and the FICA taxes for Social Security and Medicare. Your net income is the payment you actually receive. Net income, as well as your credit score and other factors, are used by car dealerships, for example, to approve you for a lease or a loan.
What is a Gross Monthly Household Income?
A loan or credit application will likely ask for your gross monthly household income. You start with your monthly income and then add any additional household income if you have it. For example, add any money that your spouse receives, child support payments paid to you, income from a second job, any regular overtime pay, public assistance, pensions, Social Security payments, business income or any other income.
- Herold’s Financial Dictionary: What is Discretionary Income?
- Quicken: What is Gross Income?
- The Student Loan Sherpa: How is My Discretionary Income Calculated?
- Zacks: Do Mortgage Lenders Use My Net or Gross Income?
- Real Car Tips: Requirements Needed to Get a Car Loan Approved
- Pocket Sense: How to Calculate Gross Income Per Month
- Neighborworks: Calculating Your Gross Monthly Income Worksheet
- My Accounting Course: What is Disposable Income?
Mary Lougee has been writing for over 10 years. She holds a Bachelor's Degree with a major in Management and a double minor in accounting and computer science. She loves writing about careers for busy families as well as family oriented planning, meals and activities for all ages.