The stable and reliable flow of income is a key consideration in mortgage loan underwriting.  A key driver of successful homeownership is confidence that all income used in qualifying the borrower will continue to be received for the foreseeable future.  If the income does not have a defined expiration date and the applicable history of receipt of the income is documented, the income is considered as stable, predictable, and likely to continue.  Otherwise, additional documentation from the borrower will be required to analyze the likelihood of the income will continue for at least next three years. 

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Employment income refers to the income received from work in the form of W-2.  Verification of the most recent two years of employment and income are generally required.  It can be done by obtaining copies of the most recent pay stubs, IRS Form W2's, and a written Verification of Employment (VOE), or direct electronic verification of employment by a TPV vendor.  Primary employment is considered if the employee typically works 40 hours of service per week. If it is less than 40 hours of service per week, it is considered as part-time employment.  Both types of employment are acceptable, however, part-time employment should have a recent 2-year consecutive employment and it is likely to continue.  Similar with part-employment, these employment or incomes are also acceptable, such as seasonal employment, overtime, bonus, tips, commission.

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Self-employment income refers to income generated by a business in which the borrower has a 25 percent or greater ownership interest.  Self-employment income can be used if the borrower has been self-employed for at least two years.  However, if the borrower has less than two years history, self-employment income may only be considered if the borrower was previously employed in the same line of work or in a related occupation for at least two years.  The lender will review the self-employment income based on the recent Federal tax returns.  In addition, a year-to-date Profit and Loss (P&L) statement and balance sheet are required if more than a calendar quarter has been elapsed since the date of the most recent calendar or fiscal year-end tax period.

Other sources of income are also acceptable are: Social Security disability, VA disability, private disability, alimony, child support, maintenance income, military income, retirement income, rental income, capital gains or losses, Trust income, Annuities, Note receivable income, royalty payment income, boarder income.

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