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The bank told us that they would accept my partner's retirement income, but not his stipend. Why is this, and is there a way to include both retirement and stipend as qualifying income. Thank you!
asked Jan 9, 2019 in VA Loans by CHELSEA

1 Answer

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Hello, Chelsea, and thank you for writing. The issue with stipend income is that mortgage lenders in the US must by law verify that borrowers have sufficient income to repay their mortgage and other expenses. This is called the Ability-to-Repay provision. Almost every mainstream mortgage program requires that qualifying income must be ongoing and permanent.

Obviously, there are no guarantees that anyone's employment is absolutely ongoing and permanent. But for things like pensions, disability benefits, retirement account withdrawals, or child support / alimony, the standard is that the supporting paperwork must show that they will continue for at least three years.

Because of the temporary nature of most stipends, they can't generally be used to qualify for a mortgage. Please feel free to check back if your stipend income is long-term. Fannie Mae, for example, requires documentation that you have received income for the most recent 12 months and that it will continue for at least three more years to count it.

Stipend income can, however, be considered a "compensating factor" and allow lenders to stretch their debt-to-income ratios a bit to accommodate an otherwise well-qualified borrower.

Thank you for  writing and if your stipend is in fact a long-term income, please let us know and I will check with some of our partners about how they would treat it.
answered Jan 15, 2019 by GinaPogol (47,650 points)

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