Other Income Sources
Qualifying for a Mortgage When Your Income Isn’t a Paycheck
Fannie Mae and Freddie Mac recognize more than 20 distinct income types that can count toward mortgage qualification. Most people know about salary, self-employment income, and Social Security — but the full list goes much further. VA disability, boarder income, royalties, trust distributions, Mortgage Credit Certificates, foster-care payments, and employment-related asset depletion are all legitimate qualifying income when documented correctly.
Each source follows its own calculation method, documentation requirements, and continuance rules. Getting them right can meaningfully change your qualifying income and, by extension, how much home you can buy. Missing one can cost you an approval or force you to buy less than you can actually afford.
This page covers all 20 Fannie Mae-recognized additional income types. Use the calculator below to estimate your qualifying income from any combination of sources.
The 125% Gross-Up Rule for Non-Taxable Income
When income is not subject to federal income tax, Fannie Mae allows lenders to gross it up by 25% — multiplying the benefit by 1.25 before calculating your debt-to-income ratio. This applies to Social Security, VA disability compensation, housing allowances for clergy, and certain other non-taxable sources.
The logic: a taxable earner pays roughly 20–25% in federal taxes, netting $0.75–$0.80 per dollar. A non-taxable recipient keeps the full dollar. The gross-up levels the playing field so these income sources aren’t artificially penalized in the DTI calculation.
This single rule can change your qualifying income significantly. A $2,000 monthly VA disability benefit becomes $2,500 in qualifying income. A $1,800 monthly Social Security benefit that you pay no tax on becomes $2,250. The gross-up must be applied by the lender — it’s not automatic — which is why working with someone familiar with these income types matters.
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This applies to you if:
- You receive Social Security, VA disability, or long-term disability benefits
- You collect pension, annuity, or government retirement distributions
- You receive regular trust distributions, royalties, or notes receivable payments
- You earn rental income reported on Schedule E, or have a boarder in your home
- You receive alimony or child support under a court order with 3+ years remaining
- You have substantial retirement or investment accounts and want to use asset depletion
- You receive RSU income, an automobile allowance, or a housing allowance from your employer
- You’re a foster parent or clergy member receiving tax-exempt allowances
- You have a Mortgage Credit Certificate from a state or local housing program
You may need a different page if:
- Your primary income is W-2 salary with overtime or bonuses — see our Mortgage Solutions page for W-2 earners
- You’re self-employed, a contractor, or run a business — see our Self-Employed Mortgage guide
- Your income comes from cryptocurrency, gambling, or one-time events — these generally don’t qualify
- You’re taking sporadic IRA or 401(k) withdrawals — lenders need consistent, documented distribution history for these to count
Documentation by Income Type
Gathering the right documents before your first conversation saves time and prevents surprises. Here’s what lenders typically need for each source:
Government Benefits
- Social Security: SSA award letter (within 12 months) + 1099-SSA
- VA Benefits: VA award letter showing monthly amount and effective date
- Public Assistance: Agency letter showing program name and expected duration
Retirement & Pension
- Pension / Annuity: Pension award letter or annuity contract + 1099-R (2 years)
- Asset Depletion: Most recent 2 months of account statements; vesting schedule for retirement accounts
- Long-Term Disability: Insurance policy documents + benefits letter
Court-Ordered Payments
- Alimony / Child Support: Divorce decree or court order; 12 months of bank statements showing receipt
- Trust Income: Complete trust document; 12 months of bank statements showing distributions
- Notes Receivable: Copy of the promissory note; 2 years of tax returns showing income received
Investment & Passive
- Interest / Dividends / Capital Gains / Royalties: 2 years of federal tax returns with Schedule B, D, and/or E
- Rental Income: 2 years of Schedule E; current lease agreements
- Boarder Income: 2 years of Schedule E showing boarder income; current rental agreement
Employment-Related
- Auto Allowance: Pay stub showing allowance; IRS Form 2106 if deducting expenses
- RSUs: 2 years of W-2s; employer equity plan documents showing vesting schedule
- Housing Allowance: Employer or church letter confirming monthly allowance amount
- Mortgage Differential: Employer relocation agreement showing subsidy amount and duration
Special Programs
- MCC: Issued MCC certificate; lender must participate in program
- Foster Care: State or county placement agreement; 2 years of tax returns showing payments
- Foreign Income: Documentation equivalent to domestic income requirements; currency conversion documentation
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Other Income Sources: Frequently Asked Questions
Yes. Lenders accept Social Security retirement and SSDI benefits as qualifying income. Because Social Security is often non-taxable, Fannie Mae and Freddie Mac allow lenders to gross it up by 25% — a $2,000 monthly benefit may be treated as $2,500 for qualifying purposes. You’ll need an SSA award letter or recent 1099-SSA to document it.
Boarder income can count toward qualifying income when it appears on your federal tax returns with at least 12 months of history. If it’s not documented on returns, most lenders won’t count it at all. Fannie Mae requires the boarder income to be no more than 30% of total qualifying income when it is used.
Employment-related assets — sometimes called asset depletion — lets borrowers with substantial savings convert those assets into imputed monthly income. Fannie Mae’s formula: take 70% of eligible retirement account balances (or 100% of non-retirement balances), subtract funds needed for closing, then divide by the loan term in months. A $500,000 retirement account on a 30-year loan generates roughly $1,167 per month in qualifying income.
Yes. VA disability compensation is non-taxable income that lenders readily accept and can gross up by 25%. A $1,500 monthly VA benefit becomes $1,875 in qualifying income. You need the VA award letter to document the amount and its continuance.
A Mortgage Credit Certificate (MCC) provides a federal tax credit based on a percentage of your annual mortgage interest. Fannie Mae allows the monthly tax credit to be treated as qualifying income: loan amount times the note rate times the MCC percentage, divided by 12. For example, a $300,000 loan at 7% with a 25% MCC generates a $437.50 monthly income credit. The lender must be participating in the MCC program and the borrower must have an issued certificate.
Other Income Sources Disclaimer
This page and calculator reflect general Fannie Mae conventional lending guidelines as commonly applied. FHA, VA, USDA, and non-QM programs may treat these income types differently. Individual lenders may apply additional overlays that restrict the use of certain income types regardless of agency guidelines.
Gross-up treatment (125%) applies to non-taxable income per Fannie Mae Selling Guide B3-3.1-09. Whether a specific income source qualifies as non-taxable is determined by applicable IRS rules and the borrower’s individual tax situation. Always verify taxability with a CPA or tax advisor before relying on gross-up calculations.
The employment-related assets (asset depletion) calculation is based on Fannie Mae B3-4.3-04. Eligible asset amounts, applicable haircuts, and loan term assumptions may differ by lender and program. Assets used for depletion income cannot also be used as reserves.
Continuance requirements (36 months for alimony/child support; 3+ years for trust income and notes receivable) reflect standard agency guidelines. Individual lenders may impose stricter requirements. This page does not constitute an offer of credit or a commitment to lend.