As a final piece to this series on calculating income for mortgage purposes for both wage earners and self-employed borrowers, I thought it would be important to explain how we view other types of income. Many borrowers don’t realize which types of income can and cannot be considered for a mortgage, and in what situations these income types will and will not count. Now, there are literally dozens of specific income types that could be listed here, so I will go over some of the most common types I come across here in Michigan, and you can always reach out to me if you have a question about any other type of income.

Alimony/Child Support: If we can document the child support will continue for the next three years and has been paid on time for the last six months, we can use it as qualifying income.

Boarder Income: This is income from a “boarder” in a primary or secondary property (not an investment property) of the applicant. This income almost never counts, unless the boarder is a live-in personal assistant helping a disabled borrower and the boarder’s rent is paid by Medicaid; in this case, 30% of the gross income may be used for qualifying. But if your buddy is renting a room in your house, we probably won’t be able to use that.

Capital Gains: This is probably the most commonly misunderstood income type I run into. This is usually not acceptable income, as it comes as a one time distribution. But if you can prove it has been consistently drawn over the past two years for the purpose of creating a salary, then it can be used.

Disability Income: It is required to be “long term” disability income, meaning it is not expiring soon or related to a short term injury. You must be able to document the income will continue for at least three years.

Interest/Dividends: If you can show a two year history of receiving the interest/dividends, we can use it as qualifying income.

Trust Income: You must provide a copy of the trust agreement or a trustee’s verification proving the trust payment amount, frequency, and duration. The income must continue for at least three years.

Unemployment Benefits: This is only usable as qualifying income for seasonal employees who can document that they are consistently receiving unemployment, will continue to receive unemployment routinely going forward, and have been for at least two years.

VA Benefits: VA Benefits are usually fine to use, so long as you can show documentation that the benefits have been awarded to you and that you will continue to receive them for at least two years. VA Education benefits are not an acceptable income source.

If you have any questions about income you receive from these or other specialty income types, please contact me and I will help you determine your eligibility. And if you would like to add anything to these income types, or add any to my list, please leave a comment.