What counts as income for a mortgage goes well beyond a W-2 paycheck. Bonus pay, Social Security, rental income, alimony, even certain non-taxable benefits can all factor into your qualifying income, each with its own documentation rules. Here’s the full picture.
W-2 Employment Income
This is the most straightforward category: your regular salary or hourly wages, verified through recent pay stubs and W-2s, typically with a two-year history expected in the same field.
Bonus, Overtime, and Commission Income
These count, but with conditions. Lenders generally want a two-year history of receiving bonus, overtime, or commission income, and will average it over that period rather than counting a single strong year. A pattern of decline can reduce how much of it counts, or exclude it from your qualifying income entirely.
Self-Employed, 1099, and Schedule C Income
Self-employed and 1099 income counts, but it’s calculated differently than a paycheck, based on net income from your tax returns rather than gross earnings, with certain deductions eligible to be added back. This is a large enough topic that it has its own dedicated resources.
Can I Get a Mortgage If I’m Self-Employed? →
Self-Employed and Non-QM Loans
Social Security and Retirement Income
Social Security, pension, and retirement account distribution income all count, generally requiring documentation that the income is likely to continue for at least three years.
One detail many borrowers don’t know: non-taxable income like Social Security can often be “grossed up,” increased by a set percentage to reflect the fact that it isn’t taxed, which can meaningfully improve your qualifying income compared to simply using the raw benefit amount.
Child Support and Alimony Income
Child support and alimony can count toward your qualifying income if you can document a consistent history of receiving it and show it’s likely to continue, typically for at least three years. Court orders, divorce decrees, and proof of consistent receipt are generally required.
Rental Income
Income from a rental property counts, usually based on a percentage of the rent shown on a lease or an appraiser’s market rent analysis, with an allowance built in for vacancy and expenses. For real estate investors qualifying based primarily on a property’s own rental income rather than personal income, a different loan structure altogether may apply.
Asset Depletion Income
For borrowers with substantial savings or investments but limited traditional income, often retirees or high-net-worth individuals, some loan programs calculate a monthly income equivalent from those assets, called asset depletion. This isn’t standard on every loan type, but it’s a real option worth knowing about if your wealth doesn’t show up as a regular paycheck.
Documentation Rules That Apply Across All Income Types
A few principles hold true no matter the income source. Lenders generally want a two-year history, evidence the income is likely to continue, and consistent documentation, tax returns, award letters, court orders, or lease agreements, depending on the type. Income that’s inconsistent, recently started, or expected to end soon typically counts for less, or not at all, regardless of how much it actually adds to your monthly cash flow.
Mortgage Planner’s Perspective
Most borrowers underestimate how much of their real financial picture can actually count toward mortgage qualification. Bonus income, Social Security, rental income, even alimony, all have a place in the calculation when documented correctly. Knowing the full list, and how each type gets treated, often changes what a borrower thinks they can qualify for.
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RELATED ARTICLES
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How Do Mortgage Lenders Calculate Self-Employed Income?
Can I Get a Mortgage If I’m Self-Employed?
What Does Mortgage Pre-Approval Really Mean?
FREQUENTLY ASKED QUESTIONS
Employment and Variable Income
Q: Does bonus or commission income count toward my mortgage?
A: Yes, generally with a two-year history required, averaged over that period. A declining pattern can reduce how much counts or exclude it.
Q: How is self-employed income different from W-2 income for qualifying purposes?
A: Self-employed income is calculated from your net income after tax deductions, not gross revenue, with certain deductions eligible to be added back. W-2 income is verified more directly through pay stubs.
Non-Traditional Income Sources
Q: Does Social Security count as qualifying income?
A: Yes, and because it’s non-taxable, it can often be “grossed up” to a higher equivalent amount than the raw benefit itself when calculating your qualifying income.
Q: Can child support or alimony count toward my mortgage?
A: Yes, if you can document a consistent history of receiving it and show it’s likely to continue, typically for at least three years.
Q: Does rental income from a property I own count?
A: Yes, generally based on a percentage of documented lease income or an appraiser’s market rent analysis, with an allowance for vacancy and expenses.
Q: What if I have significant savings but little traditional income?
A: Some loan programs offer asset depletion qualification, calculating a monthly income equivalent from your liquid assets, a useful option for retirees or high-net-worth borrowers.
Texas Mortgage Plan – 50+ years of combined mortgage experience, serving homeowners and homebuyers across Flower Mound and the DFW Metroplex. Elizabeth Rose, NMLS 252686, CDLP® Certified Divorce Lending Professional | Shea Patton, Mortgage Advisor, NMLS #251397, Licensed Realtor. Texas Mortgage Plan is a d/b/a of Legacy Mortgage, NMLS #1759275 | Equal Housing Lender