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Last updated on September 8th, 2021 at 03:22 pm
For a mortgage loan application, borrowers need to show that he is earning sufficient income to pay back the loan.
But some borrowers receive stipend income payments from a company, school, or organization instead of a regular salary or hourly wage
These stipends don’t count as income toward a mortgage because they are only temporary.
But if the stipend income will continue long-term, then you might qualify.
For a Fannie Mae-backed loan, a borrower is required to provide documentation of income for the latest 12 months and proof showing that it will continue for another three years at least for stipend income to count on an application.
People in the health care industry and members of the clergy or those in the charity or non-profit industry receive living stipends that are considered reliable and significant enough to be considered on a loan application.
However, very few lenders accept this kind of mortgage application.
How can a stipend income help you qualify?
When deciding to approve you for a mortgage loan income alone is not a deciding factor.
A lender looks at income in relation to your monthly debts ie, your debt to income ratio or ‘DTI.’ which should be less than 43%.
The bigger your income, the larger mortgage you can qualify for based on your DTI.
As a stipend income is not counted directly as income, so it won’t decrease your debt ratio.
but it can be used as a compensating factor that may increase your chances to qualify.
You’ll need a primary source of income to be eligible for the loan, not just a stipend income.
Options for borrowers with stipend income
Lenders likely won’t be able to approve you if you are earning only stipend income so what other options do you have?
When you buy with a spouse, family member, or close friend who’s a full-time, salaried worker then it allows you both to qualify for the loan because of your combined income and credit history.
A home can be bought with your co-borrowers income, and your own stipend income acting as a compensating factor.
And both are responsible for monthly payments and would share the equity gains.
Reference Source: The Mortgage Reports
