What Constitutes Income in the Mortgage Process?

When you’re considering buying a home, one of your first questions should be, “What can I use as income?”

One obvious answer is salaried or hourly income, providing that it’s stable and you can prove that you expect to continue receiving it for the foreseeable future. Ideally, you’ll have two years of stable work experience to show, but that isn’t absolutely necessary.

Changing/starting a job

If you have changed jobs in the previous two years for either a better position or a pay increase, that’s fine with your lender, as this demonstrates upward mobility.

Recent college graduates, who are usually entering the workforce for the first time, may be asked to provide transcripts showing the dates of attendance and graduation.

Other income

There are other less obvious income sources, such as commissions, self-employment income, Social Security, disability settlements, and unemployment benefits. Some can be used under certain guidelines; some can’t be used under any circumstances.

In applying for a mortgage, you should be able to show earned commission or self-employment income for a minimum of twelve months; ideally, it should be twenty-four months. Expect to provide full documentation: Self-employed borrowers will need tax returns signed by their tax preparer and year-to-date profit-and-loss statements.

Social Security must continue for at least three years, and a disability settlement must have no end date, indicating it is expected to continue. Unemployment can’t be used, as it will eventually end.

Contact your mortgage professional for more information on what does and doesn’t constitute income.