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Mortgage Income Types

For some mortgage applicants income comes from a single source – W2 employment. For others, you could be looking at a number of gig-economy and self-employment situations. Beyond employment, there may be many additional sources of income that need to be considered when applying for a mortgage.

Child Support

An ongoing, periodic payment received by a parent for the financial benefit of a child.

On your mortgage application, child support may only be included if it has been consistently received for at least 6 months and will continue to be received for at least another 3 years.

Child support doesn’t need to be revealed if you don’t want Achroma to consider it in determining your creditworthiness.

Alimony

An ongoing, periodic payment received by a former spouse as a result of a divorce.

On your mortgage application, only include alimony if it has been consistently received for at least 6 months and will continue to be received for at least another 3 years.

Alimony doesn’t need to be revealed if you don’t want Achroma to consider it in determining your creditworthiness.

Social Security

Benefits for retirement or long-term disability. If your social security income is from another person’s account or work record then it can only be used if it will continue for at least 3 years.

Retirement Income (Pension, IRA)

A regular payment received during a person’s retirement from an investment fund.

On your mortgage application, retirement income must continue for at least 3 years if the source is a 401(k), IRA or Keogh account.

Disability Income

Payment for a disability that created a barrier to complete core functions.

If you are receiving short-term disability that will convert to a lower amount in long-term disability within the next 3 years, you should report the lower amount on your mortgage application.

Interest & Dividends

Distributions from a mutual fund or interest-bearing account.

On your mortgage application, this is calculated by taking the two-year monthly average of all amounts. If you use this income, you should be prepared to provide two years tax returns.

Trust

Payments from a trust fund account. Trust fund income can be used on your mortgage application if it will continue for at least 3 more years.

Public Assistance Income

Government benefits provided to those who qualify, usually paid in the form of cash or vouchers.

Public assistance income can be used on your mortgage application if it will continue for at least 3 years. The Housing Choice Voucher Program (Section 8) can be used without any continuance restraints.

Capital Gains

A profit from the sale of property or of an investment. Since this is usually a one-time transaction it can only be included on your mortgage application with a two-year history showing consistent income. We most typically see this with professional securities trader.

Tips & Gratuities

Extra income paid to people who work in the service industry.

Tips and gratuities can be included on your mortgage application if there is a two year history of receiving it. To calculate this, you should use the average monthly amount from the previous two years.

Unemployment Benefits

Temporary benefit payments to employees who are out of work through no fault of their own. Unemployment benefits income can be used on a mortgage application if it is received regularly from year to year and has been received for at least 2 years. Use the average monthly amount from the previous two years. This usually applies to seasonal workers.

Temporary Leave Income

Income provided on a limited basis for an absence from due to short-term disability, parental leave or other temporary leave. Only use this income on your mortgage application if you will not return to work as of the first mortgage payment. This can be used in lieu of your regular salary in that case.

Separate Maintenance Payment

Similar to alimony, a way for one spouse to continue to support the other during separation. This can only be included on your mortgage application if it has been consistently received for at least 6 months and will continue to be received for at least another 3 years. This income type doesn’t need to be revealed if you don’t want Achroma to consider it in determining your creditworthiness.

VA Compensation

Benefits paid to Veterans with injuries incurred during active military service. This income can be used on your mortgage application if it will continue for at least 3 more years.

Royalty Payments

Payments received from the ownership of a particular asset for the right to ongoing use. This income can be used if it has been received for at least 1 year and will continue for at least 3 more years.

Employment-Related Assets

Distributions from employment-related assets that aren’t being used for down payment, closing costs or reserves. Assets must be liquid and be owned by you and they can’t be non-employment assets (i.e. checking/savings, inheritance, divorce proceeds, lottery winnings, etc.). If the source is a 401k or IRA then divide amounts not used for closing costs, down payment and reserves by the term of the loan. If the source is an employer retirement package (i.e. Pension) then it will be the amount listed on the distribution letter.

Automobile Allowance

Your employer provides you with an allowance for a car. You can include the allowance as income on your mortgage application as long as it’s been received for at least 2 years. Don’t forget to include the corresponding car payment in the liabilities section of your application.

Foster Care Income

Income received from a state- or county-sponsored organization for providing temporary care for one or more children. Foster care income can be used on a mortgage if it’s been received for at least 2 years or if less than two years but at least 1 year and it represents no more than 30% of qualifying income.

Foreign Income

Income received from a foreign corporation or government and paid in foreign currency. If you use this income to qualify make sure to convert it to U.S. dollars and be prepared to provide two years tax returns.

Boarder Income

Income for lodging, meals, or related services from people living in their primary residence or second home. This is only acceptable for borrowers with disabilities who are receiving rent from a live-in personal assistant. If that is the case then up to 30% of the qualifying income can come from boarder income. Can be used for any person paying boarder income on a Fannie Mae HomeReady mortgage.

Housing or Parsonage Income

Money received in compensation for basic living expenses for employment situations. This income can be used if it’s been received for at least 1 year and will continue for at least 3 more years.

Mortgage Credit Certificate

A tax credit for some portion of the mortgage interest paid during a given tax year. To calculate this for your mortgage application, take the percentage of the credit and multiply this by the loan amount and the interest rate and then divide by 12 to get a monthly amount.

Mortgage Differential Payments

Employer subsidized mortgage payments where the employer pays all or part of the interest difference between the current and proposed mortgage payments. This income can be used if it will continue for at least 3 years.

Notes Receivable Income

Receipt of payments on a formal loan that you’ve extended to someone else. This income can be used if it has been received for at least 1 year and will continue for at least 3 more years.