Miscellaneous Income

Here's what you need to know about using various types of miscellaneous income to qualify for a mortgage.

Alimony or Child Support

• A divorce decree or other legal document must show that the income will continue for at least three years
• Must document that full, regular, and timely payments have been made for the past 12 months
• 6-12 months is acceptable, provided the alimony or child support is not more than 30% of the total income used to qualify the borrower

Capital Gains Income

Only acceptable if the borrower can document the following:
• Capital gains income has been received for the previous two years – income tax returns are required. The income is then averaged over the past two years.
• The borrower must document that they have additional property or assets that can be sold to pay the mortgage

Disability Income

• If the income will continue for at least three more years, it can be counted
• If the borrower is currently receiving short-term disability, which will be converted to long-term disability in the next three years, and the payments will decrease, the lower, long-term payments must be used

Income from Employment-Related Assets

• Examples: 401(k), IRA, SEP, and KEOGH retirement accounts – income is NOT being withdrawn
• The assets must be available for withdrawal without penalty – borrower must be old enough to withdraw
• The assets must be owned individually by the borrower, unless the only other owner is the co-borrower
• Only 70% of the assets can be counted
• Income is calculated as: total assets x 70% / 360
• Example: $500,000 in assets would be calculated as $972 per month in income500,000 x 70% / 360 = 972

Retirement, Government Annuity, Social Security, and Pension Income

• Must document that the income is being received – W-2’s or 1099’s, retirement award letter, etc.
• Must document that the income will continue for at least three years

Foreign Income

• Must have been received for the previous two years
• Must be converted into US dollars

Foster Care Income

• Must have received the income for the previous two years as shown on tax returns
• 12 months is acceptable if the foster care income is not more than 30% of the income used to qualify the borrower
• Must document that the income will continue at a level high enough to qualify for the mortgage

Interest and Dividend Income

• Must show that interest or dividend income was received for the previous two years
• Income is averaged over the past two years
• Must show that it will continue for at least three years

Non-Occupying Co-Borrower Income

• Example: parents buy a condo for their child – often referred to as a “kiddie condo” loan
• Income from the non-occupying co-borrower is allowed for FHA loans
• It is not allowed for conventional loans, unless the occupying borrower can qualify by themselves, without the income

Tip Income

• Must document that the income has been received for the previous two years
• The tip income is averaged over the previous two years
• The borrower’s employer must state that the tip income is likely to continue


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Want to make sure your loan closes? Call the Mortgage Experts at 303-345-3683.