Income for mortgage applications: Here’s what you need to know

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Key takeaways

Various types of income may help you qualify for a mortgage — for example, employment income, self-employment income, and military income.
You may be required to provide evidence of your income, such as pay stubs, W-2s, and tax returns.
Lenders may use the debt-to-income (DTI) ratio to assess your ability to manage debt and make payments.

Please note: Discover® Home Loans does not offer purchase mortgages, but the information included here may be useful when applying for mortgage refinancing or second mortgages like home equity loans.

Lenders typically consider various types of income when determining whether someone can repay a mortgage. Understanding which income qualifies for a mortgage may make the application process less stressful.

What kinds of income qualify for a mortgage?

To comply with regulations, a lender is required to verify your income to ensure you can repay a loan. Below, learn what types of income may help you qualify for a mortgage:

Employment income

Salaried, hourly, and other types of employment income may be used to qualify for a mortgage. A lender may ask for proof of this income on documents such as recent pay stubs and W-2 forms.

If you've recently had a change in pay, such as a raise, you should get a statement from your employer confirming the change is permanent.

Depending on the lender, you may also be able to use other employment income, such as overtime and commissions, to help you qualify for a mortgage.

If additional employment income comes from a source outside of your primary employer, you may need to show evidence of this income as well.

Self-employment income

A lender will usually look at your net income to determine whether you may qualify for a mortgage. This is your gross income minus any business expenses.

Expect to provide tax returns that show your net income. You will likely need to provide these documents for at least the last two years.

Military Income

Military income, such as salary and certain benefits, may be used to qualify for a mortgage. You may need to show evidence of this income by providing documents such as W-2 forms and Leave and Earnings Statements.

No matter your employment status, your lender may request additional information when processing your mortgage application. Be sure to check their requirements before you apply, so you have time to collect and organize everything you need.

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Other types of income

Below are a few other sources of income that a lender may consider when determining your eligibility for a mortgage:

Interest and dividends
Social Security income
Non-taxable income
Some types of rental income

DTI ratio to qualify for a mortgage

Many mortgage lenders use the debt-to-income (DTI) ratio to assess your ability to manage debt and make payments. This is the percentage of your gross monthly income that goes toward your monthly debt payments.

Debt payments may include:

Credit card payments
Car payments
Personal and student loan payments
Monthly child support and alimony payments

To determine your DTI, your lender will add up your monthly debt payments and divide that amount by your gross monthly income.

Closing thoughts: Qualifying income for a mortgage

Regardless of how you make a living, mortgage lenders need to determine your ability to make repayments. When you apply for a mortgage, lenders are typically looking at factors that include:

Your income: This may include employment income, self-employment income, military income, interest and dividends, Social Security income, and other sources of income.
Your work history: This helps a lender understand how stable your income is.
Your DTI ratio: This is the percentage of your gross monthly income that goes toward your monthly debt payments.
Your credit score: Lenders typically look at your credit score to review your credit history and see how responsibly you have managed your debt obligations. Generally, a low credit score means you're more likely to pay higher interest rates.

Main: The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Capital One, N.A. or its affiliates.

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We do not lend in IA or MD. You are not guaranteed approval. Once you apply and submit your credit and property information, we will confirm your eligibility. We don’t lend on cooperatives, condotels, investment properties, log homes, manufactured homes, mobile homes, or secondary homes. We will only originate one 1st lien mortgage per property per 12-month period. The maximum loan amount you qualify for will depend on additional factors, including type of loan, lien position, loan-to-value and your credit history. We may change rates, program terms, and conditions without notice. Discover Card accounts and other Capital One accounts (with the exception of Discover home and personal loans) may not be paid off with this home loan. All loan programs are offered by Capital One, N.A., 2500 Lake Cook Road, Riverwoods, IL 60015. NMLS ID 453156.