Q:

What does "gross salary" mean?

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Quick Answer

"Gross salary" refers to a person's income, typically stated on an annual basis, prior to any deductions or taxes. Gross salary is different from net salary, which is the actual take-home pay a person receives after the employer withholds taxes and other deductions.

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Full Answer

A person's gross salary is normally used by creditors to evaluate a new loan application. On a conventional mortgage, a lender usually tries to maintain a 28 percent mortgage-to-income ratio. If a person makes $60,000 gross per year, that amounts to $5,000 per month. Twenty-eight percent of that is $1,400. Thus, the conventional maximum monthly payment the borrower could afford is $1,400.

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