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What is Classified as Income When Qualifying for a Mortgage?

calendarMay 30, 2016

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Knowing what forms of income can be used to determine whether you qualify or not for a mortgage can be confusing. It’s important to know the difference between which forms of income will count for qualifying purposes and which will not. Here’s a breakdown of some of the more common sources of income and what they mean.

Employment Income

Employment income counts when it is a full-time position without any probationary period. A Full-time position with either salary or hourly pay with guaranteed hours is considered eligible income and is usually confirmed through a recent paystub and job letter. If your income is from a part-time job then the hours have to be guaranteed or you have to have a two year average to work with.

Self-Employment Income

Self-Employment income can be a little trickier to navigate. In order to be eligible for a regular income qualified mortgage, a two year average is used of your claimed net income. Providing two years history of your Notice of Assessments and T1 Generals is required to determine if you can qualify. However self-employed income can look very different on paper. We have specialized programs to allow for those unable to provide traditional income verification but have a proven two-year history of managing their business, credit and finances responsibly. Eligible borrowers income can then be confirmed via a third-party arm’s length document confirming how long they have been in business. The borrower is required to declare their annual income and annual business revenue, which should be reasonable based on the industry, length of operation, and type of business. If the above two options aren’t a fit as income for your particular situation then we can always look to alternative lenders for self-employed income solutions.

Seasonal Income

As a seasonal worker, there must be a track record spanning the past two or three years to demonstrate stability and sustainability of income. The average income over those years will determine whether you qualify.

Overtime Income

Overtime work can be used for qualifying purposes, but in order to qualify as income you must provide a track record that proves there was consistent income from this specific overtime work. A two year average of the overtime work can be used for qualification purposes.

Pension and Disability Income

Short term and long term disability is generally not accepted as income without a return to work date. If your disability is permanent and can provide a letter to confirm it can be used. If you are receiving a guaranteed pension, this is generally acceptable as eligible income when qualifying for a mortgage as well.

Child Tax Credit

It is possible for Child Tax Credit to be used, however lenders can be hesitant about this form of income. There are various factors involved that can determine whether it will be acceptable or not, so the best course of action to take is consulting with a mortgage professional to determine your options. There are many types of income that can be classified as income for qualifying purposes, but there can also be a variety of details and factors that will provide reassurance for the lender and allow it to be acceptable. The bottom line is for most forms of income, if you can provide proof and a track record of a stable and consistent income, your chances of using that income in order to qualify for a mortgage becomes significantly higher. If you’re feeling unsure, consult with a mortgage advisor to determine your options and what course of action is best for you. The Mortgage Advisors are ready to serve you with mortgage brokers in Ottawa, Stittsville, Nepean, Kingston, Renfrew, Brockville, Perth, and Cobourg.
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