The largest part of qualifying for a loan is showing you can afford it. This means verifying your income. What if you don’t have typical employment income, though? Are you out of luck? The good news is that there are several times of non-employment types of income you can use. Each type has a specific method of verification you must follow.
Keep reading to learn how you can qualify for a loan without a typical employer-based salary.
You are not required to disclose alimony on your loan application. If you do, though, you may be able to use it for qualifying purposes. Your lender will need to verify a few things before using it though:
- It must continue for at least 3 years. You can prove this with the court. This could be the divorce decree, separation agreement, or a voluntary agreement created by you and your spouse paying you.
- You must have proof of receipt of the income. You can do this with your bank statements over the last 12 months. The money must be received around the same time each month to be acceptable. You may also submit canceled checks or tax returns proving the income.
If you have children under the age of 18 and receive child support regularly, you may use it as income. Just like alimony, though, you must prove receipt for the next 3 years. If your child is 16-years old, for example, you won’t be able to claim this income as you’d only have 2 years of receipt left. Assuming you’ll receive child support for the next three years, you’d need the following:
- Court ordered child support amount and date or required receipt
- Proof of receipt of the income with bank statements and/or tax returns
- Proof of continuance for the next three years
If you receive government-assisted income, such as disability pay, you may be able to use it to qualify for your loan. Just like alimony or child support income, you must prove you’ll receive it for at least the next 3 years. This is usually determined with the award letter you received. If you don’t have the award letter, you may need to ask the paying party for proof of the term you will receive payment.
You’ll also need to prove receipt of the income. You can do so with your bank statements, canceled checks and tax returns. Again, the more consistent the dates of deposit, the better chances you’ll have of using this money for qualifying purposes.
If you cannot prove the income will continue for the next three years, though, no lender can accept it for qualifying.
If you have rental properties that you own, you may be able to use the income for qualifying purposes. In order to do so, you must meet the following requirements:
- You must have an executed lease stating the amount of the rent and the date it’s due
- Proof of receipt of rental income for the last 24 months with no gaps
- Proof of the rental income on Schedule E of your tax returns
You cannot claim rent on a property you just vacated, though. It must be on a property that you were receiving rent on for at least the last 12 months – but 24 months is better. If you don’t have an executed lease on a property, but project you will rent it out, you may be able to use projected income as a compensating factor. You cannot use it to offset your mortgage payment, though.
If you have money invested that you are able to live off of on a regular basis, it may count for mortgage qualifying. You must meet the following requirements though:
- Proof of receipt of the income for the last 24 months in a consistent manner
- Proof of the investment income on your tax returns (if you don’t claim it, you can’t use it)
- Proof of the duration and amount of any trust payments
Many lenders take the full value of your investment accounts and divide it up among your monthly debts, including the proposed mortgage payment. For example, let’s say you have $800,000 invested. A lender may qualify you for a $1,555 mortgage payment after doing the following calculation:
$800,000 x 70% = $560,000 available for qualifying
$560,000/360(months) = $1,555 mortgage payment
If you have additional income on top of this amount, it can increase your ability to qualify for a loan.
You don’t have to use employment income to qualify for a loan. However, you’ll have to jump through a few more hoops to get it qualified. Talk to your lender about all avenues of your income to see what will qualify you for a mortgage. The bottom line is that you need proof of at least three years of continuance and proof of receipt of the income on a regular basis.