Qualifying for a Mortgage Loan: Which Sources of Income Count?

Prequalifying for a mortgage loan can help you understand how much you can afford to pay for a home, and what kind of mortgage best suits your needs. Prequalifying means that a mortgage lender will assess your financial ability to get a mortgage loan. Prequalifying for a mortgage doesn't guarantee loan approval as it does not consider all aspects of the loan approval process. What types of income can be considered for prequalifying?

Prequalify Using Multiple Income Sources

The key factor in determining income eligible for use in prequalifying is continuity. Lenders will review all sources of income, but typically use only sources that are expected to continue on a steady basis. Allowable sources of income may include

Salary and/or wages from full and part time permanent jobs
Income from recurring seasonal employment
Employer paid bonuses (paid on a predictable, periodic basis)
Social security, disability, retirement, and veteran's pensions
Rental income including rent paid by family
Alimony, child support and public assistance income

Lenders will require proof of all sources of income, and will distinguish between sporadic or occasional sources of income, and stable, regularly scheduled income. You can document supplemental sources of income by providing copies of bank statements showing deposits of amounts claimed, tax returns, and payroll/deposit stubs from your employers.

Special rules apply to certain types of income including alimony and child support. You do not have to reveal these sources of income unless you choose to do so. The more income sources you have, the better your chances of prequalifying for a home loan.

Prequalify: Using Sporadic Sources of Income

Garage sales, temporary jobs, and other one-time sources of income cannot usually be considered as income for the purposes of prequalifying, but they can be added to savings or investment accounts to be counted as assets. Significant amounts received on a one-time basis can be applied toward a down payment. A larger down payment can lead to lower financing costs and lender fees in addition to lowering the amount needed for your mortgage loan.

Before approaching a mortgage lender, you can use online mortgage calculator tools to estimate how much down payment you'll need, how much income you need to qualify for a certain mortgage amount, or you can use an affordability calculator to see if you're ready to prequalify for a home loan.

Karen Lawson
Karen Lawson is a freelance writer with extensive background in mortgage banking. She holds BA and MA degrees in English from the University of Nevada, Reno.