When qualifying for a mortgage many people only think about using the income from their job but what if I told you there are other options? Fortunately, there are a variety of other income sources which can be used to qualify. When it comes to usable qualifying income for a mortgage the key is that the stream of income is consistent and expected to continue. Below are some great examples of other sources of income which can be used to qualify.
Asset Depletion or Assets as a Basis of Repayment – If you have large sums of money sitting in your bank account,, a percentage of those funds can be used as a monthly “income” source. This can be a great alternative to paying for a house in all cash if you were considering doing so, or if you have additional retirement assets that aren’t being used toward the transaction. Yes, you’ll have the interest charges that come with having a mortgage but you will have the benefit of keeping a large number of your assets liquid versus being locked up in the equity of your home.
Child Support and Alimony – You will need a copy of your Marriage Separation Agreement or Divorce Decree as well as bank statements to document that you have been receiving child support and/or alimony. It is much easier to use this income if you have already been receiving payments and the amount is consistent.
Interest & Dividend Income – If you are living that passive income life and your investments are generating dividends and/or interest you can use that to qualify for a mortgage. A two-year history from Schedule B of your personal tax returns will be used to calculate a monthly average for qualifying. You will also need to provide assets statements that show you still have the funds to continue receiving these interest/dividends. Do note this is different from the dividends you may be receiving in an IRA.
Rental Income – If you own an investment property or multiple investment properties, you can use the rental income to qualify. Underwriting will use the net of the rental income you are receiving and the monthly housing obligations including mortgage payments, homeowners insurance, property taxes, and HOA dues. If you have a mortgage on the investment property, this rental income can help offset the mortgage payment so the property does not negatively affect your debt-to-income ratio, and if the property cash-flows, it could result in substantial qualifying income for your new mortgage.
Retirement Income – If you have Social Security, a pension, 401k, or IRA that is paying you distributions, you can use this to qualify. The key here is that you are of retirement age. If you are of retirement age, and have an IRA but are not receiving distributions from it, you can set them up and start using them immediately to qualify.
Trust Income – If you have a trust that is holding assets, you can use them to qualify. You will need to be receiving distributions from the trust in order to do this. It is somewhat similar to asset depletion so we advise talking to your financial advisor to see if this option stays in line with your other financial goals.
VA Benefits/Disability – First off, if you served our country, Thank you! All of us at Bluefire Mortgage appreciate your service. Second off, know that you can use VA benefits or disability that you may be receiving. Unfortunately, we are unable to use GI Bill income.
In general, there needs to be at least a three-year expected continuance for any of these incomes (and in some situations, more) but be sure to discuss your specific situation with one of our Loan Consultants. If you have any questions about qualifying for a mortgage, give us a call at (760)930-0569.