Variable Income and Mortgages: Credit, Down Payment, Forms

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In part one of this two-part blog series, we went over some basics on how those who earn variable incomes can still go about finding and purchasing the home of their dreams. While a few of the details might be a bit different here from those who work more traditional jobs, the mortgage world has adapted to accommodate the rising numbers of people who have different forms of variable income, “gig” jobs and more.

At VIP Mortgage Inc., we’re proud to offer the very best mortgage rates and a wide range of mortgage programs to our clients, including those who earn a variable income of any kind. Today’s part two of our series will go over several additional areas that are important to consider if you’re among this group, including important details on the paperwork you’ll have to fill out.

Credit Score

Credit score is important to all mortgage borrowers, and particularly so for those with a variable income. Because lenders have less certainty with borrowers who have less stable income, they can be considered riskier than those with more traditional jobs for which the mortgage lenders are certain of their ability to repay.

For this reason, credit score may be weighted even more heavily to those borrowers with variable incomes. This doesn’t mean that you won’t be able to get a home loan or better interest rates if your credit score isn’t what you’d like it to be, but it’s something you’ll want to keep in mind as you work toward purchasing your dream home.

Down Payment Themes

One other common challenge for borrowers with a variable income is saving enough money to secure a large enough down payment. Often, they can’t save as much as those with more traditional jobs, and this is another factor the lenders look at when making their final decision on whether or not to approve you for a home loan.

Lenders will usually accept 5% down payments from borrowers with variable incomes who have excellent credit scores and steady employment histories, while it’s possible borrowers with this same credit score who have other financial factors that are viewed as an added risk may have to come up with a 10% down payment.

Important Paperwork

In addition to standard paperwork you have to fill out for a mortgage application, here are a couple specific pieces you may have to attend to if you have a variable income:

  • Two years of tax returns, plus an explanation of your income trends that help the lender understand how you make enough money to cover the loan.
  • Form 4506-T will need to be signed — this allows the lender to request a copy of your tax returns to prove your stated income.
  • Proof of income: If you can put together bank statements, 1099 forms and other documents to prove your income, this will help your situation.
  • Proof of other assets: Also bring proof of things like investment assets, life insurance, savings and even proof of your on-time rent payments if you’ve previously been renting.

For more on how to secure a mortgage despite a variable income, or to learn about any of our home loan services, speak to the team at VIP Mortgage Inc. today.

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