How to Establish Your Income When Traditional Methods Fail

For the vast majority of borrowers, establishing your income is simple. Take a couple years of tax returns, bring along some paystubs, and the lender can do the rest. Most lending agents and institutions are experienced using these documents, which make the mortgage process fast and easy.

But for some borrowers, paystubs and tax returns simply don’t work for loan qualification.

For example, commission-based professionals, such as real estate agents or sales associates, often have inconsistencies in their incomes. One month you may earn $5,000, while the next month may only bring $1,000. And the month after that might bring $10,000. This not only makes budgeting a challenge, it makes qualifying for a loan more difficult.

Tax returns also have their flaws. People who are self employed often use tax deductions and write-offs to lower their overall tax burden. This perfectly legal practice (which is actually encouraged, as it helps keep job-creating businesses in operation) means that a business owner’s tax returns may not be entirely accurate, at least from an income-establishment perspective.

With these challenges, establishing your income for the sake of a mortgage can be more difficult, but it’s certainly not impossible. Using a variety of strategies, a top-quality lending agent can establish an income no matter what your specific situation. And in some cases, these strategies may actually increase your borrowing potential.

Let’s take a look at six options in particular that help establish your income and help you qualify for a mortgage loan that meets your needs, budget, and future goals.

Don’t Have Paystubs? Here Are Six Ways We Can Establish Your Income

1. A Single Year of Tax Returns

Multiple years of tax returns are commonly used to establish income, but sometimes an individual has year-to-year inconsistencies with their tax information, causing differences from one year to the next. These differences can cause issues for someone seeking a loan, but that may not be an issue if you work with our staff.

We can use a single year of tax returns to help you get qualified, which will make the process more efficient and more convenient. If you earned a sizable income last year (especially compared to the previous year), this could be the right strategy for your needs.

2. IRA Distributions (Even Without a History of Receipt)

Distributions from an IRA are often used to help a person qualify for a loan. But what if you have a significant amount of money in your IRA but are not yet taking distribution payments? In this case, you can use the account as income without a history of receipt, as long as you are 59.5 years of age or older.

With this strategy, you can take advantage of your retirement accounts, which you will use to support your lifestyle in future years. Because that money will be used in the future, it makes sense to use it as part of your established income.

You can use assets like stocks and other investments to qualify for a loan.

3. Asset Depletions

If you do not have an income, or if your income is irregular, you can use an option called “asset depletion.” Essentially, with this strategy you add up the sum of all assets, including savings, retirement accounts, and anything else of significant value. You then take that value and divide it by a certain number, usually about 360. This final number becomes the monthly income that you can use for qualification.

Say you have $500,000 in retirement and investment accounts. This $500,000 would then be divided by 360. (Or whichever number is being used.) This leaves us with $1,389. This total can then be added to your income and used to help qualify for a mortgage.

4. Ordinary Income without a Distribution

It is also possible to work with our staff to use your ordinary income without a distribution from retirement accounts to establish your income. This is a convenient way to establish an income that will help you qualify for a mortgage, and we can help with the process from start to finish.

5. Equity from Real Estate

Income property is consistent, reliable, and often brings some of the strongest returns you can have, and if you have equity, it can be even more beneficial. However, some lending institutions are not as experienced at using this form of investment to qualify potential borrowers.

The basics of using income property is quite simple. Basically, if you own a certain percentage of your properties, you can use this ownership as part of your established income. This means that your personal properties and income-producing properties could actually help you qualify for a loan on another property, further increasing your portfolio.

6. Bank Statements

Of all the different strategies we can use to establish your income, this is likely the most simple and straightforward. Simply put, we can take a look at your bank statements and use that information to determine the income listed on your loan application.

In many ways, this is a far more reliable and consistent way to determine someone’s income, and while paystubs are the most common, using bank statements allows us to look not only at the amount of money you deposit, but also the amount you have flowing out. With this information, we can be more confident in our loans. Bank statements also show how much you have in savings, which can be useful if you need to establish cash reserves or prove you can afford closing costs and the downpayment. Using bank statements, we can increase your chances of loan approval, even if you don’t have reliable pay stubs or tax returns. 

Helping Establish Your Income So You Can Get a Quality Loan

If any of these ways to establish your income sound useful for your situation, contact our staff today. We can work with you to increase your chances of mortgage approval, helping you get the right loan for your specific purchase.

Whether you need a mortgage for your primary home or a new investment opportunity, contact our staff and let us help establish your income with one of these useful methods!



“Chad Baker is THE BEST, most professional, understanding, HONEST person I’ve ever worked in the mortgage industry. He knows exactly what he’s talking about, will never promise something he can’t deliver, and will bend over backwards to get you what you need. I had a very unique problem qualifying and every other mortgage company I worked with assured me from the beginning that they could get me financed, and then it would all fall apart once we hit underwriting. Chad understood my circumstance from the beginning and patiently explained every step of the way. I can’t thank you enough Chad! Juliann has been great keeping me updated and making sure that everything comes together in a timely fashion. She also appreciates my sense of humor, which gives personality to a boring funding process. Thanks Juliann! I HIGHLY recommend Home Point and if I ever buy another home, will absolutely use them again.”

Incredible Turnaround and Stellar Customer Service. Chad and his team helped us get into our first home here in San Diego. When we first started the process we were skeptical it would even be worth applying. But Chad and his team walked us through the whole lending process with integrity and know how that surpassed our expectations. After helping us to pull together our pre-qualification, he and his team stayed at the ready. Before we even walked up to a home we were seriously interested in he had the data we needed over to us and our realtor. After finding the home we wanted to place a bid on, we were able to place a bid with a matter of a few hours. Then, after having our offer accepted, he had our loan package completed and the keys in our hands in under a month — I am pretty sure it was less than. Like I said, incredibly fast and professional turnaround. if you are looking for a motivated lender who can walk you though every detail and have your back every step of the way, Chad and his team at HomePoint Financial is your best decision. Recommend them highly!”

Chad Baker and his team are amazing!

My husband and I found Chad through an article he had written. Every aspect of working with Chad and his team was exceptional. From our initial phone call where he explained the many options we had, to advice he gave in dealing with somewhat challenging sellers, and closing our loan ahead of schedule, the loan process with Chad and his team went very smoothly. I especially appreciated the one-on one guidance from Juliann, who really made me feel like I was her only client. I look forward to working with Chad and his team again and would highly recommend them to anyone looking for a mortgage.