We are an independent, advertising-supported comparison service. Our objective is to empower you to make confident financial decisions by giving you access to interactive tools and financial calculators, publishing original and unbiased content, and allowing you to conduct free research and information comparisons.
Issuers that Bankrate has partnerships with include American Express, Bank of America, Capital One, Chase, Citi, and Discover, among others.
Getting pre-approved for a mortgage is one of the first steps in the important life decision of buying a home. However, the answer to the question of what income banks consider when determining whether to approve you for a loan is more nuanced than you might imagine.
What Counts as Income for a Mortgage?
The good news is that banks are willing to consider a wide variety of income sources when qualifying you for a mortgage This includes:
- Employment income: This is the most common type of income, and it includes your base salary, wages, bonuses, commissions, and overtime pay.
- Self-employment income: If you’re self-employed, you’ll need to provide documentation of your income, such as tax returns or bank statements.
- Investment income: This includes interest, dividends, and capital gains.
- Rental income: If you own rental property, you can include the rental income in your mortgage application.
- Retirement income: This includes income from pensions, annuities, and Social Security.
- Government benefits: This includes income from Social Security, disability benefits, and unemployment benefits.
- Alimony and child support: These can also be included in your mortgage application.
How Much Income Do You Need to Qualify for a Mortgage?
There’s no single answer to this question. as the amount of income you need to qualify for a mortgage will depend on several factors. including:
- The type of loan you’re applying for: Conventional loans typically require a higher income than government-backed loans, such as FHA loans.
- Your credit score: The higher your credit score, the lower your interest rate will be, and the more likely you are to qualify for a mortgage.
- Your debt-to-income ratio (DTI): This is the percentage of your gross monthly income that goes towards debt payments. Lenders typically want your DTI to be 50% or less.
- The size of your down payment: The larger your down payment, the less money you’ll need to borrow, and the more likely you are to qualify for a mortgage.
How to Improve Your Chances of Qualifying for a Mortgage
If you’re worried about qualifying for a mortgage there are a few things you can do to improve your chances:
- Increase your income: This could mean getting a raise, taking on a side hustle, or investing in income-producing assets.
- Improve your credit score: You can do this by paying your bills on time, keeping your credit utilization low, and disputing any errors on your credit report.
- Reduce your debt: This will lower your DTI and make you a more attractive borrower.
- Increase your down payment: This will show the lender that you’re serious about buying a home and that you have some skin in the game.
Obtaining a mortgage preapproval is a crucial stage in the house-buying process. Your chances of obtaining the loan you require to purchase your ideal home can be improved by knowing what factors banks consider when determining income and how to better tailor your application.
Frequently Asked Questions
What are some common types of income that banks don’t count towards a mortgage?
Some common types of income that banks don’t count towards a mortgage include:
- Gifts: Gifts from family or friends can’t be used as income for a mortgage.
- Expected future income: If you’re expecting a raise or a bonus in the future, you can’t count that income towards your mortgage.
- Unverifiable income: If you can’t provide documentation to support your income, it won’t be counted towards your mortgage.
What if I’m self-employed?
If you work for yourself, you must submit proof of your income in the form of bank statements or tax returns. You’ll also need to show that you have a steady income history.
What if I have bad credit?
You might still be eligible for a mortgage even if your credit isn’t the best. However, you’ll likely have to pay a higher interest rate.
What if I don’t have a down payment?
There are a few government-backed loan programs that allow you to buy a home with no down payment. However, you’ll likely have to pay higher mortgage insurance premiums.
Additional Resources
- Fannie Mae’s Guide to Income
- Bankrate’s Guide to Proving Income for a Mortgage
- HUD’s Guide to Qualifying for a Mortgage
Disclaimer
I am an AI chatbot and cannot provide financial advice. The information above is not intended to be financial advice; rather, it is for general knowledge and informational purposes only. Before making any financial decisions, it is imperative to speak with a licensed financial advisor.
How we make money
You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We always work to give customers the professional guidance and resources they need to be successful on their financial journey.
Bankrate follows a strict editorial policy, so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers.
By outlining our revenue streams, we are open and honest about how we are able to provide you with high-quality material, affordable prices, and practical tools.
Bankrate. com is an independent, advertising-supported publisher and comparison service. We receive payment when you click on specific links that we post on our website or when sponsored goods and services are displayed on it. Therefore, this compensation may affect the placement, order, and style of products within listing categories, with the exception of our mortgage, home equity, and other home lending products, where legal prohibitions apply. The way and location of products on this website can also be affected by other variables, like our own unique website policies and whether or not they are available in your area or within your own credit score range. Although we make an effort to present a variety of offers, Bankrate does not contain details about all financial or credit products or services.
- In order to be eligible for a mortgage, there are no specific income requirements.
- Lenders use your debt-to-income (DTI) ratio to assess your eligibility for a loan by comparing your income to the total amount of debt you have, including your mortgage.
- The amount of your down payment, your credit score, and the interest rate you pay all have a significant impact on whether you can get a loan.
There are numerous mortgage options, ranging from government to conventional loans, to accommodate borrowers with different financial circumstances and credit scores. Although there isn’t a set minimum income requirement to be eligible for a mortgage, you must make enough money to be able to afford the loan back. Here’s how to qualify for a mortgage and how your income can impact the decision.
How We Make Money
The offers that appear on this site are from companies that compensate us. Unless our mortgage, home equity, and other home lending products are specifically prohibited by law, this compensation may have an impact on how and where products appear on this website, including, for example, the order in which they may appear within the listing categories. However, this payment has no bearing on the content we post or the user reviews you see here. We do not include the universe of companies or financial offers that may be available to you.
tab1962/Getty s Bankrate logo
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Bankrate logo.
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve upheld this reputation for more than 40 years by assisting people in making sense of the financial decision-making process and providing them with confidence regarding their next course of action.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of the content we publish is objective, accurate, and reliable because it is written by highly qualified professionals and edited by subject matter experts.
In order to give you peace of mind when making decisions as a buyer and homeowner, our mortgage reporters and editors concentrate on the topics that matter most to consumers: the newest rates, the greatest lenders, navigating the homebuying process, refinancing your mortgage, and more. Bankrate logo.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our goal is to give readers reliable, unbiased information, and we have established editorial standards to make sure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU — the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. Thus, you can be sure that the information you’re reading, whether it’s an article or a review, is reliable and reputable. Bankrate logo.