Lending guidelines vary from investor to investor, but most do allow non-employment income to be used if you can verify a history of receipt of the income and confirm that it’s going to continue for a certain length of time, say 3+ years. Here are some basic guidelines on what a lender can use for qualifying income based on source of income:
Employed: In addition to your base or guaranteed wages, income can be used for overtime, bonus, and commission earnings provided that you have a two year history and verification from your employer that it’s likely to continue. Depending on the loan program, this income may be averaged over the last two years.
Self Employed: This income may be used if you’ve been self employed for 2 years. Your lender will ask for 1- 2 years of filed tax returns to determine income analysis depending on the loan program and automated underwriting results.
Part time Income: Part time income is not the borrower’s primary employment and is typically a second job. This income can be used if you have a 2 year history, with verification of current earnings and likelihood of continuance.
Other Sources of Income: The following sources of income may all be used if you can verify the source of the income, a history of it being received on a regular basis, and that the source of income is continuing for a minimum of 3 years:
- Disability Benefits
- Alimony, Child Support and Maintenance Income
- Military Income: base pay, Basic allowance for housing, clothing allowances, flight/hazard pay, basic allowance for Subsistence, and proficiency pay.
- Retirement Income from Pensions, 401k distributions, Annuities, and Social Security
- Supplemental Security Income (SSI) from Social Security
- Investment Income: includes interest and dividends from assets owner and that will continue to exist after a home purchase
- Trust Income, with regular distributions
- Notes Receivable Income
Each circumstance of type of income can vary, along with the loan program guidelines for it and documentation that’s required. Give us a call if you have any questions.