In traditional lending, we are presented daily with many different income sources. Whether you are a Realtor servicing a potential client, an investor trying to buy rental properties, or even a flipper wanting renovation loan options, it is important to know how your income will effect qualifying for financing. The following shows the 4 main types of income sources and how they are viewed when qualifying for a mortgage.
This is often referred to as a W-2 income within the mortgage industry. This income is the typically the easiest to use. The lender verifies it by requiring paystubs, tax returns, and a verification of employment.
This income source typically comes with a 1099 for your taxes. It is much more difficult to use this income. It is essential to have a two-year history of self-employed income from the same industry and/or company. You also will need tax returns, two years of 1099s, and a current YTD balance sheet and P&L if utilizing FHA financing.
This is very common in the service industry. Tip income is usable if there is proper documentation. As with self employed income, you need two years history to be able to utilize it. You also need to have paystubs that reflect earnings from the previous two years, a current paystub that reflects YTD earnings, W-2s from employer, and a verification from your employer that breaks down your tip income.
A seasonal job would consist of working in a department store during the holiday season or umping baseball games in the summer. In order to utilize income received from these positions, you must have two years history in the same type of job. You also must be able to reasonably assure the bank that the income is expected to continue.
There are numerous different income types out there. Speak with me if you have any questions regarding the requirements to utilize this income.
• Don’t open new debts while in contract
• Don’t quit your job
• Don’t deposit substantial amounts of cash into your bank account.
• Disclose all debts Let me know if you have any questions and have a great rest of your month
by Andrew Augustyniak, Branch Manager