Non-Taxable Income Can Be Grossed Up by 25% to Qualify; Child Support and Social Security
This is a reminder that lenders allow borrowers receiving non-taxable income to “gross it up” by 25% for qualifying purposes in most cases. Non-taxable income most commonly includes Social Security income and/or Child Support income.
What Is Non-taxable Income?
Non-taxable income is any form of income that is paid to an individual where the gross income equals the net. The amount received is not taxed at the federal or the state level.
Such income is sometimes “taxable,” depending on a borrower’s income level overall or how the divorce decree reads. We therefore always need to see tax returns to know for sure.
In most cases, however, it works like this. If a borrower receives $2,000 of non-taxable support per month, we can gross it up to $2,500 for qualifying purposes. This extra “income” is often just enough to enable to a borrower to qualify for the property he or she desires.
Examples Of Non-taxable Income
There are certain types of income that are never subject to taxes, and are some of the most common types of non-taxable income homebuyers might use when purchasing a home.
Examples of non-taxable income can include:
- Disability insurance payments
- Life insurance payouts
- Tax-exempt interest
- Social security income
- Child support income
- Alimony payments
Qualifying With Non-taxable Income
If you are planning to purchase a home using any type of non-taxable income, be prepared for lenders to ask for your taxes to verify the income. If a particular type of income, like child support, will end soon, it cannot count towards qualification. Some lenders will also allow borrowers receiving non-taxable income to “gross it up” by 25% for qualifying purposes in most cases. Non-taxable income most commonly includes Social Security income and/or Child Support income. If you have any questions about verifying your income or your ability to qualify for a mortgage using non-taxable income, contact JVM Lending’s team. They are available 7 days a week and are available for any questions or concerns as you navigate the homebuying process.
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