The Good News About Income Verification When Buying a Home
Your income is one of the most important financial factors to consider when buying a home. But income can take on many different shapes and sizes, and verifying that income for a home loan isn’t always straightforward.
The good news? Even if your income sources are non-traditional, your mortgage advisor may be able to work with you to verify that income and get you approved for a home loan.
Key takeaways
What you need to know about income verification when buying a home
Income verification for non-W2 employees
How secondary or non-traditional income sources can be taken into account when getting approved for a mortgage
Other income sources (not related to employment) that may be useful in getting qualified for a home loan
Income Verification: The Basics
In order to qualify for buying a home, your mortgage advisor will need to verify your income. And when verifying your income, your mortgage advisor wants to prove that your income is “stable and likely to continue.”
This is part of the reason why it’s ideal for you to have been employed in the same field for at least 2 years, because that 2 year time period helps to prove that your income is in fact stable and likely to continue.
So there is a general rule that you may need to show continuous employment for at least 2 years in the same field in order to qualify…
However, if you’ve made any changes during that time period for advancement or special training in that field (such as college education), then that doesn’t necessarily disqualify you!
Generally, when verifying your primary income, your mortgage advisor will ask for 2 years of W2s or 30 days of paystubs.
But you might also have some secondary sources of income as part of your job such as overtime, yearly or quarterly bonuses, commissions in addition to your base salary, or part-time earnings.
All of these secondary sources of income can potentially be counted toward your income verification.
Can you still verify my income for a home loan if I am not a W2 employee?
Even if you’re not a W2 employee, this does not disqualify you from buying a home!
If you’re a business owner, a contract worker, or you’re self-employed, you’re just going to have to provide different documentation to support that income source.
These documents may include 2 years of tax returns, profit and loss statements, or balance sheets, but your mortgage advisor will tell you exactly what they need from you there.
What about secondary or non-traditional income sources?
Secondary or more non-traditional sources of income can potentially be counted toward your income verification.
Here are some examples of what these non-traditional income sources could be:
Side gigs (rideshare service, grocery delivery, pet care, etc)
Sales or commission-based jobs
Seasonal employment (landscaping, holiday festivals, summer school teacher)
With these non-traditional forms of income, your mortgage advisor just needs to prove that they are stable and likely to continue.
If you’ve been working that side gig, commission-based job, or seasonal job for 2 years, then that’s going to be much easier for your mortgage advisor to verify that income for you.
They’ll usually just look at your total income from that job over the last 2 years, figure out that average, and verify the income source from there.
Even if you have a non-traditional source of income like side gigs, commission-based, or seasonal employment, if you’ve been doing that job for some time, then this shouldn’t be a problem.
Now where it gets difficult is if you just picked up that new job a couple months ago and now you’re looking to buy a home.
In that case, it might be a little harder to verify that source of income for your home loan.
And sure, you could still use that extra source of income for things like moving expenses, home maintenance, extra savings, or other costs not directly related to your home purchase, but it may just not be able to count as part of your qualifying income when getting you approved for a mortgage.
Reminder: Do NOT Disqualify Yourself
It’s important that you’re aware of what it takes to verify your income, but if you are worried about this, please do NOT disqualify yourself before speaking to a professional beforehand.
That’s because there may be other options and programs available to help you get into a home without necessarily needing to meet these income requirements.
So even if you think that your income source might hold you back from qualifying, your mortgage advisor might be able to work with you to help you get approved sooner than you thought.
You just can’t know for certain whether or not you qualify without speaking to a mortgage advisor directly about your specific situation.
What about other sources of income that are not related to my current employment?
There are several different types of income that mortgage advisors can take into account when getting you qualified for a home loan.
Here are some examples of additional income sources not related to your employment:
Rental Income
Pensions
Disability Payments
Retirement
Interest-Yielding Investments
Alimony or Child Support
Social Security
And more!
All these income sources may potentially be counted as part of your qualifying income when getting you approved for a mortgage.
Even if they can’t count as your primary source of income, they may be still useful for when your mortgage advisor is getting you approved.
That’s why when talking to your mortgage advisor, it’s a good idea to disclose ALL your sources of income to them.
Income Verification Summary
Your mortgage advisor has to verify your income in order for you to qualify for a home loan.
Typically, your income has to be “stable and likely to continue” in order to count as part of your qualifying income when getting a mortgage.
Non-traditional or secondary sources of income can potentially count, so make sure you disclose ALL your income sources to your mortgage advisor.
If you’re worried about your income verification, speak to a professional first and do NOT disqualify yourself right off the bat. Your mortgage advisor may be able to work with you to get you qualified sooner than you thought.
