Using ‘Side Gig’ Income to Help Qualify

Written by Posted On Thursday, 02 May 2024 00:00
Using ‘Side Gig’ Income to Help Qualify Photo by Alexander Grey on Unsplash

Lots have been said about ‘side gig’ income these days. You know, extra income outside of your current full time job. Whether it’s because things are a bit more expensive than they used to be or just because someone wants a little extra money on the side to do with whatever. Maybe it’s just a part time job somewhere or perhaps it’s a bit of consulting work. Whatever the source, while the extra income is nice to have, some might wonder if a lender will include it when qualifying for a home loan. The answer is probably not. Here’s why.

First, lenders want to see some stability in income. That’s why lenders can ask for at least a two year employment history. If you’ve applied for a  mortgage before, you’re familiar with the lender sending an employment verification form to your employer to verify how long you’ve been there and how much you make. Yes, that information is asked for on the initial loan application but lenders want some third party verification as well.

The income must also show consistency. It needs to be in your bank account on a regular basis. This is why paycheck stubs are often used to verify when you get paid and how much money you make, including year-to-date amounts. Lenders can use both stability and consistency when peeking into the future. Lenders also want to feel confident that your employment will continue into the future. By showing a history of both a lender can make a reasonable determination that you’ll keep your current job.

Okay, all of that is for your full time job. Now, what about this side gig business?

Side gig income still must meet the same qualifications. First, is there a history of this extra income? This can be shown by providing recent tax returns to show a two year history of receipt. This extra income needs to show the same amount of stability as your full time work. If, for example, this new side gig money is relatively recent, it won’t fall into the category of consistency and therefore can’t be used to help qualify. A solid history? Yes. If not, then no.

Stability is also a key ingredient. Has this extra income been coming in for a while? And if so, is it likely to continue? If it meets the same qualifications as regular income, then yes. Showing this stability indicates the income is likely to continue and can be used to pay the bills.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending. 

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country. 

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