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Can multiple retirement accounts be used to satisfy the three-year continuance for retirement income paid in the form of a distribution?

B3-3.1-09, Other Sources of Income (10/05/2022)

Introduction

This topic provides information on documenting and qualifying a borrower's income from sources other than wages and salaries, including:

  • Documentation Requirements for Current Receipt of Income
  • Alimony, Child Support, or Separate Maintenance
  • Automobile Allowance
  • Boarder Income
  • Capital Gains Income
  • Disability Income — Long-Term
  • Employment Offers or Contracts
  • Employment-Related Assets as Qualifying Income
  • Foreign Income
  • Foster-Care Income
  • Housing or Parsonage Allowance
  • Interest and Dividends Income
  • Mortgage Credit Certificates
  • Mortgage Differential Payments Income
  • Non-Occupant Borrower Income
  • Notes Receivable Income
  • Public Assistance Income
  • Retirement, Government Annuity, and Pension Income
  • Royalty Payment Income
  • Schedule K-1 Income
  • Social Security Income
  • Temporary Leave Income
  • Tip Income
  • Trust Income
  • VA Benefits Income

Documentation Requirements for Current Receipt of Income

The documentation required for each income source is described below. The documentation must support the history of receipt, if applicable, and the amount, frequency, and duration of the income. In addition, evidence of current receipt of the income must be obtained in compliance with the Allowable Age of Credit Documents policy, unless specifically excluded below. See B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, for additional information.

Current receipt may be documented by various means, depending on the income type. Examples include but are not limited to

  • current paystubs,

  • bank statements confirming direct deposit,

  • canceled checks from the payer's account to the borrower,

  • court records, or

  • copies of the borrower's bank statements showing the regular deposit of these funds.

Note: Any income received by the borrower in the form of virtual currency, such as cryptocurrencies, is not eligible to be used to qualify for the loan. For income types that require sufficient remaining assets to establish continuance, those assets cannot be in the form of virtual currency.

Alimony, Child Support, or Separate Maintenance

The following table provides verification requirements for alimony, child support, or separate maintenance.

✓ Verification of Income From Alimony, Child Support, or Separate Maintenance
Document that alimony, child support, or separate maintenance will continue to be paid for at least three years after the date of the mortgage application, as verified by one of the following:

  • A copy of a divorce decree or separation agreement (if the divorce is not final) that indicates the monthly payment and states the amount of the award and the period of time over which it will be received.

    Note: If a borrower who is separated does not have a separation agreement that specifies alimony or child support payments, the lender should not consider any proposed or voluntary payments as income.

  • Any other type of written legal agreement or court decree describing the payment terms.

  • Documentation that verifies any applicable state law that mandates alimony, child support, or separate maintenance payments, which must specify the conditions under which the payments must be made.

Check for limitations on the continuance of the payments, such as the age of the children for whom the support is being paid or the duration over which alimony is required to be paid.
Document no less than six months of the borrower's most recent regular receipt of the full payment.
Review the payment history to determine its suitability as stable qualifying income. To be considered stable income, full, regular, and timely payments must have been received for six months or longer. Income received for less than six months is considered unstable and may not be used to qualify the borrower for the mortgage. In addition, if full or partial payments are made on an inconsistent or sporadic basis, the income is not acceptable for the purpose of qualifying the borrower.

Note: The lender may include alimony, child support, or separate maintenance as income only if the borrower discloses it on the Form 1003 and requests that it be considered in qualifying for the loan.

Automobile Allowance

For an automobile allowance to be considered as acceptable stable income, the borrower must have received payments for at least two years. The lender must add the full amount of the allowance to the borrower's monthly income, and the full amount of the lease or financing expenditure to the borrower's monthly debt obligations.

Boarder Income

Income from boarders in the borrower's principal residence or second home is not considered acceptable stable income with the exception of the following:

  • When a borrower with disabilities receives rental income from a live-in personal assistant, whether or not that individual is a relative of the borrower, the rental payments can be considered as acceptable stable income in an amount up to 30% of the total gross income that is used to qualify the borrower for the mortgage loan. Personal assistants typically are paid by Medicaid Waiver funds and include room and board, from which rental payments are made to the borrower.

  • The HomeReady mortgage eligibility requirements include an additional exception. See Chapter B5-6, HomeReady Mortgage.

The following table provides verification requirements for income from boarders.

✓ Verification of Income from Boarders
Obtain documentation of the boarder's history of shared residency (such as a copy of a driver's license, bills, bank statements, or W-2 forms) that shows the boarder's address as being the same as the borrower's address.
Obtain documentation of the boarder's rental payments for the most recent 12 months.

Capital Gains Income

Income received from capital gains is generally a one-time transaction; therefore, it should not be considered as part of the borrower's stable monthly income. However, if the borrower needs to rely on income from capital gains to qualify, the income must be verified in accordance with the following requirements.

✓ Verification of Capital Gains Income
Document a two-year history of capital gains income by obtaining copies of the borrower's signed federal income tax returns for the most recent two years, including IRS Form 1040, Schedule D.
Develop an average income from the last two years (according to the Variable Income section of  B3-3.1-01, General Income Information), and use the averaged amount as part of the borrower's qualifying income as long as the borrower provides current evidence that they own additional property or assets that can be sold if extra income is needed to make future mortgage loan payments.

Note: Capital losses identified on IRS Form 1040, Schedule D, do not have to be considered when calculating income or liabilities, even if the losses are recurring.

Due to the nature of this income, current receipt of the income is not required to comply with the Allowable Age of Credit Documents policy. However, documentation of the asset ownership must be in compliance with the Allowable Age of Credit Documents policy (see B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, for additional information).

Disability Income — Long-Term

The following table provides verification requirements for long-term disability income. It does not apply to disability income that is received from the Social Security Administration. See the applicable section below for information on Social Security income.

✓ Verification of Long-Term Disability Income
Obtain a copy of the borrower's disability policy or benefits statement from the benefits payer (insurance company, employer, or other qualified disinterested party) to determine

  • the borrower's current eligibility for the disability benefits,

  • the amount and frequency of the disability payments, and

  • if there is a contractually established termination or modification date.
Generally, long-term disability will not have a defined expiration date and must be expected to continue. The requirement for re-evaluation of benefits is not considered a defined expiration date.

If a borrower is currently receiving short-term disability payments that will decrease to a lesser amount within the next three years because they are being converted to long-term benefits, the amount of the long-term benefits must be used as income to qualify the borrower. For additional information on short-term disability, see Temporary Leave Income below.

Employment Offers or Contracts

If the borrower is scheduled to begin employment under the terms of an employment offer or contract, the lender may deliver the loan in accordance with one of the options outlined below.

✓ Option 1 -- Paystub Obtained Before Loan Delivery
The lender must obtain an executed copy of the borrower's offer or contract for future employment and anticipated income.
Prior to delivering the loan, the lender must obtain a paystub from the borrower that includes sufficient information to support the income used to qualify the borrower based on the offer or contract. The paystub must be retained in the mortgage loan file.
✓ Option 2 -- Paystub Not Obtained Before Loan Delivery
This option is limited to loans that meet the following criteria:

  • purchase transaction,

  • principal residence,

  • one-unit property,

  • the borrower is not employed by a family member or by an interested party to the transaction, and

  • the borrower is qualified using only fixed base income.
The lender must obtain and review the borrower's offer or contract for future employment. The employment offer or contract must

  • clearly identify the employer and the borrower, be signed by the employer, and be accepted and signed by the borrower;

  • clearly identify the terms of employment, including position, type and rate of pay, and start date; and

  • be non-contingent. Note: If conditions of employment exist, the lender must confirm prior to closing that all conditions of employment are satisfied either by verbal verification or written documentation. This confirmation must be noted in the mortgage loan file.

Also note that for a union member who works in an occupation that results in a series of short-term job assignments (such as a skilled construction worker, longshoreman, or stagehand), the union may provide the executed employment offer or contract for future employment.
The borrower's start date must be no earlier than 30 days prior to the note date or no later than 90 days after the note date.

Prior to delivery, the lender must obtain the following documentation depending on the borrower's employment start date:
If the borrower's start date is... Documentation Required
The note date or no more than 30 days prior to the note date

  • Employment offer or contract; and

  • Verbal verification of employment that confirms active employment status
No more than 90 days after the note date Employment offer or contract
The lender must document, in addition to the amount of reserves required by DU or for the transaction, one of the following:

  • Financial reserves sufficient to cover principal, interest, taxes, insurance, and association dues (PITIA) for the subject property for six months; or

  • Financial resources sufficient to cover the monthly liabilities included in the debt-to-income ratio, including the PITIA for the subject property, for the number of months between the note date and the employment start date, plus one. For calculation purposes, consider any portion of a month as a full month.

    Financial resources may include:

    • financial reserves, and

    • current income.

    Current income refers to net income that is currently being received by the borrower (or coborrower), may or may not be used for qualifying, and may or may not continue after the borrower starts employment under the offer or contract. For this purpose, the lender may use the amount of income the borrower is expected to receive between the note date and the employment start date. If the current income is not being used or is not eligible to be used for qualifying purposes, it can be documented by the lender using income documentation, such as a paystub, but a verification of employment is not required.
The lender must deliver the loan with Special Feature Code 707.

Note: DU will issue a verification message related to employment offers and contracts if the borrower's current employment start date is blank or after the date the loan casefile was created.

Foreign Income

Foreign income is income that is earned by a borrower who is employed by a foreign corporation or a foreign government and is paid in foreign currency. Borrowers may use foreign income to qualify if the following requirements are met.

✓ Verification of Foreign Income
Copies of signed federal income tax returns for the most recent two years that include foreign income.

The lender must satisfy the standard documentation requirements based on the source and type of income as outlined in Chapter B3–3, Income Assessment.

All documents of a foreign origin must be completed in English, or the originator must provide a translation, attached to each document, and ensure the translation is complete and accurate.

Note: All income must be translated to U.S. dollars. If the borrower is not a U.S. citizen, refer to  B2-2-02, Non–U.S. Citizen Borrower Eligibility Requirements, for additional information.

Foster-Care Income

Income received from a state- or county-sponsored organization for providing temporary care for one or more children may be considered acceptable stable income if the following requirements are met.

✓ Verification of Foster-Care Income
Verify the foster-care income with letters of verification from the organizations providing the income.
Document that the borrower has a two-year history of providing foster-care services. If the borrower has not been receiving this type of income for two full years, the income may still be counted as stable income if

  • the borrower has at least a 12-month history of providing foster-care services, and

  • the income does not represent more than 30% of the total gross income that is used to qualify for the mortgage loan.

Housing or Parsonage Allowance

A housing or parsonage allowance may be considered qualifying income if there is documentation that it has been received for the most recent 12 months and the allowance is likely to continue for the next three years. The housing allowance may be added to income but may not be used to offset the monthly housing payment.

Interest and Dividends Income

The following table provides verification requirements for interest and dividends income.

✓ Verification of Income From Interest and Dividends
Verify the borrower's ownership of the assets on which the interest or dividend income was earned. Documentation of asset ownership must be in compliance with the Allowable Age of Credit Documents policy (see B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, for additional information).
Document a two-year history of the income, as verified by

  • copies of the borrower's signed federal income tax returns, or

  • copies of account statements.
Develop an average of the income received for the most recent two years. Refer to the Variable Income section of  B3-3.1-01, General Income Information, for additional information.
Subtract any assets used for down payment or closing costs from the borrower's total assets before calculating expected future interest or dividend income.

Mortgage Credit Certificates

States and municipalities can issue mortgage credit certificates (MCCs) in place of, or as part of, their authority to issue mortgage revenue bonds. MCCs enable an eligible first-time homebuyer to obtain a mortgage secured by his or her principal residence and to claim a federal tax credit for a specified percentage (usually 20% to 25%) of the mortgage interest payments.

When calculating the borrower's DTI ratio, treat the maximum possible MCC income as an addition to the borrower's income, rather than as a reduction to the amount of the borrower's mortgage payment. Use the following calculation when determining the available income:

[(Mortgage Amount) x (Note Rate) x (MCC %)] ÷ 12 = Amount added to borrower's monthly income.

For example, if a borrower obtains a $100,000 mortgage that has a note rate of 7.5% and they are eligible for a 20% credit under the MCC program, the amount that should be added to their monthly income would be $125 ($100,000 x 7.5% x 20% = $1500 ÷ 12 = $125).

The lender must obtain a copy of the MCC and the lender's documented calculation of the adjustment to the borrower's income and include them in the mortgage loan file.

For refinance transactions, the lender may allow the MCC to remain in place as long as it obtains confirmation prior to loan closing from the MCC provider that the MCC remains in effect for the new mortgage loan. Copies of the MCC documents, including the reissue certification, must be maintained in the new mortgage loan file.

Mortgage Differential Payments Income

An employer may subsidize an employee's mortgage payments by paying all or part of the interest differential between the employee's present and proposed mortgage payments.

When calculating the qualifying ratio, the differential payments should be added to the borrower's gross income.

The payments may not be used to directly offset the mortgage payment, even if the employer pays them to the mortgage lender rather than to the borrower.

The following table provides verification requirements for mortgage differential payment income.

✓ Verification of Income From Mortgage Differential Payments
Obtain written verification from the borrower's employer confirming the subsidy and stating the amount and duration of the payments.
Verify that the income can be expected to continue for a minimum of three years from the date of the mortgage application.

If this income is used on a purchase transaction, current receipt is not required to be documented except as verified in the employer letter. For refinance transactions where the income is continuing with the new loan, the recent receipt must be in compliance with the Allowable Age of Credit Documents policy (see B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns, for additional information).

Non-Occupant Borrower Income

DU will consider a non-occupant borrower's income as qualifying income for a principal residence with certain LTV ratio limitations.

For manually underwritten loans, the income from a non-occupant borrower may be considered as acceptable qualifying income. This income can offset certain weaknesses that may be in the occupant borrower's loan application, such as limited income, financial reserves, or limited credit history. However, it may not be used to offset significant or recent instances of major derogatory credit in the occupant borrower's credit history. The occupant borrower must still reasonably demonstrate a willingness to make the mortgage payments and maintain homeownership. If the income from a non-occupant borrower is used for qualifying, the LTV ratios are limited.

See  B2-2-04, Guarantors, Co-Signers, or Non-Occupant Borrowers on the Subject Transaction, for information about the maximum LTV, CLTV, and HCLTV ratios that apply when non-occupant borrower income is used for qualifying purposes for both DU and manually underwritten loans.

Notes Receivable Income

The following table provides verification requirements for notes receivable income.

✓ Verification of Income From Notes Receivable
Verify that the income can be expected to continue for a minimum of three years from the date of the mortgage application.
Obtain a copy of the note to establish the amount and length of payment.
Document regular receipt of income for the most recent 12 months.

Payments on a note executed within the past 12 months, regardless of the duration, may not be used as stable income.

Public Assistance Income

The following table provides verification requirements for public assistance income.

✓ Verification of Public Assistance Income
Document the borrower's receipt of public assistance income with letters or exhibits from the paying agency that state the amount, frequency, and duration of the benefit payments.
Verify that the income can be expected to continue for a minimum of three years from the date of the mortgage application.

The Housing Choice Voucher Program (more commonly known as Section 8) is also an acceptable source of qualifying income. There is no requirement for the Section 8 voucher payments to have been received for any period of time prior to the date of the mortgage application or for the payments to continue for any period of time from the date of the mortgage application.

✓ Verification of Section 8 Payment Vouchers
Determine from the public agency that issues the vouchers the monthly payment amount and whether the income is nontaxable.

If the income is nontaxable, the lender can develop an adjusted gross income for the borrower. See  B3-3.1-01, General Income Information, for additional information.

Income from Unemployment Benefits

Income from unemployment benefits is typically short-term in nature and can be considered when qualifying the borrower in the following scenarios:

  • The income has been consistently received for at least two years as verified by copies of the signed federal income tax returns that reflect the unemployment income is associated with seasonal employment. See  B3-3.1-05, Secondary Employment Income (Second Job and Multiple Jobs) and Seasonal Income, for additional information.
  • The income from unemployment benefits can be used in the calculation of financial resources that are required under Option 2 in Employment Offers and Contracts above.

Retirement, Government Annuity, and Pension Income

The following table provides verification requirements for retirement, government annuity, and pension income.

✓ Verification of Retirement, Government Annuity, and Pension Income
Document current receipt of the income, as verified by one or more of the following:

  • a statement from the organization providing the income,

  • a copy of retirement award letter or benefit statement,

  • a copy of financial or bank account statement,

  • a copy of signed federal income tax return,

  • an IRS W-2 form, or

  • an IRS 1099 form.
If income from a government annuity or a pension account will begin on or before the first payment date, document the income with a benefit statement from the organization providing the income. The statement must specify the income type, amount and frequency of the payment, and include confirmation of the initial start date.
If retirement income is paid in the form of a distribution from a 401(k), IRA, or Keogh retirement account, determine whether the income is expected to continue for at least three years after the date of the mortgage application. Eligible retirement account balances (from a 401(k), IRA, or Keogh) may be combined for the purpose of determining whether the three-year continuance requirement is met.

Note: The borrower must have unrestricted access to the accounts without penalty.

If a borrower's retirement, annuity, or pension income is validated by the DU validation service, DU will issue a message indicating the required documentation. This documentation may differ from the requirements described above. See  B3-2-02, DU Validation Service.

Royalty Payment Income

The following table provides verification requirements for royalty income.

✓ Verification of Income From Royalty Payments
Obtain copies of the

  • royalty contract, agreement, or statement confirming amount, frequency, and duration of the income; and

  • borrower's most recent signed federal income tax return, including the related IRS Form 1040, Schedule E.
Confirm that the borrower has received royalty payments for at least 12 months and that the payments will continue for a minimum of three years after the date of the mortgage application.

Refer to the Variable Income section of  B3-3.1-01, General Income Information, for additional information.

Schedule K-1 Income

For borrowers who have less than 25% ownership of a partnership, S corporation, or limited liability company (LLC), ordinary income, net rental real estate income, and other net rental income reported on IRS Form 1065 or IRS Form 1120S, Schedule K-1 may be used in qualifying the borrower provided the lender can confirm the business has adequate liquidity to support the withdrawal of earnings. If the Schedule K-1 provides this confirmation, no further documentation of business liquidity is required.

The following table provides verification of income requirements for Schedule K-1 borrowers with less than 25% ownership of a partnership, an S corporation, or an LLC.

✓ Verification of Schedule K-1 Income
If the Schedule K-1 reflects a documented, stable history of receiving cash distributions of income from the business consistent with the level of business income being used to qualify, then no further documentation of access to the income or adequate business liquidity is required. The Schedule K-1 income may then be included in the borrower's cash flow.
If the Schedule K-1 does not reflect a documented, stable history of receiving cash distributions of income from the business consistent with the level of business income being used to qualify, then the lender must confirm the business has adequate liquidity to support the withdrawal of earnings. The lender may use discretion in the method used to confirm the business has adequate liquidity.
If the borrower has a two-year history of receiving "guaranteed payments to the partner" from a partnership or an LLC, these payments can be added to the borrower's cash flow.

Note: An exception to the two-year requirement of receiving "guaranteed payments to the partner" is if a borrower has recently acquired nominal ownership in a professional services partnership (for example, a medical practice or a law firm) after having an established employment history with the partnership. In this situation, the lender may rely on the borrower's guaranteed compensation. This must be evidenced by the borrower's partnership agreement and further supported by evidence of current year-to-date income.

Documentation Requirements

The borrower must provide the most recent two years of signed individual federal income tax returns and the most recent two years of IRS Schedule K-1.

Temporary Leave Income

Temporary leave from work is generally short in duration and for reasons of maternity or parental leave, short-term medical disability, or other temporary leave types that are acceptable by law or the borrower's employer. Borrowers on temporary leave may or may not be paid during their absence from work.

If a lender is made aware that a borrower will be on temporary leave at the time of closing of the mortgage loan and that borrower's income is needed to qualify for the loan, the lender must determine allowable income and confirm employment as described below.

✓ Temporary Leave -- Employment Requirements
The borrower's employment and income history must meet standard eligibility requirements as described in Section B3–3.1, Employment and Other Sources of Income.
The borrower must provide written confirmation of his or her intent to return to work.
The lender must document the borrower's agreed-upon date of return by obtaining, either from the borrower or directly from the employer (or a designee of the employer when the employer is using the services of a third party to administer employee leave), documentation evidencing such date that has been produced by the employer or by a designee of the employer.

Examples of the documentation may include, but are not limited to, previous correspondence from the employer or designee that specifies the duration of leave or expected return date or a computer printout from an employer or designee's system of record. (This documentation does not have to comply with the Allowable Age of Credit Documents policy.)
The lender must receive no evidence or information from the borrower's employer indicating that the borrower does not have the right to return to work after the leave period.
The lender must obtain a verbal verification of employment in accordance with B3-3.1-07, Verbal Verification of Employment. If the employer confirms the borrower is currently on temporary leave, the lender must consider the borrower employed.
The lender must verify the borrower's income in accordance with Section B3–3.1, Employment and Other Sources of Income. The lender must obtain

  • the amount and duration of the borrower's "temporary leave income," which may require multiple documents or sources depending on the type and duration of the leave period; and

  • the amount of the "regular employment income" the borrower received prior to the temporary leave. Regular employment income includes, but is not limited to, the income the borrower receives from employment on a regular basis that is eligible for qualifying purposes (for example, base pay, commissions, and bonus).

Note: Income verification may be provided by the borrower, by the borrower's employer, or by a third-party employment verification vendor.

Requirements for Calculating Income Used for Qualifying

If the borrower will return to work as of the first mortgage payment date, the lender can consider the borrower's regular employment income in qualifying.

If the borrower will not return to work as of the first mortgage payment date, the lender must use the lesser of the borrower's temporary leave income (if any) or regular employment income. If the borrower's temporary leave income is less than his or her regular employment income, the lender may supplement the temporary leave income with available liquid financial reserves (see B3-4.1-01, Minimum Reserve Requirements). Following are instructions on how to calculate the "supplemental income":

Supplemental income amount = available liquid reserves divided by the number of months of supplemental income

  • Available liquid reserves: subtract any funds needed to complete the transaction (down payment, closing costs, other required debt payoff, escrows, and minimum required reserves) from the total verified liquid asset amount.

  • Number of months of supplemental income: the number of months from the first mortgage payment date to the date the borrower will begin receiving his or her regular employment income, rounded up to the next whole number.

After determining the supplemental income, the lender must calculate the total qualifying income.

Total qualifying income = supplemental income plus the temporary leave income

The total qualifying income that results may not exceed the borrower's regular employment income.

Example

Regular income amount: $6,000 per month

Temporary leave income: $2,000 per month

Total verified liquid assets: $30,000

Funds needed to complete the transaction: $18,000

Available liquid reserves: $12,000

First payment date: July 1

Date borrower will begin receiving regular employment income: November 1

Supplemental income: $12,000/4 = $3,000

Total qualifying income: $3,000 + $2,000 = $5,000

For loan casefiles underwritten with DU, refer to B3-3.5-01, Income and Employment Documentation for DU, for data entry guidance.

Note: These requirements apply if the lender becomes aware through the employment and income verification process that the borrower is on temporary leave. If a borrower is not currently on temporary leave, the lender must not ask if he or she intends to take leave in the future.

Tip Income

The following table provides verification requirements for tip income.

✓ Verification of Tip Income
Obtain the following documents:

  • a completed Request for Verification of Employment (Form 1005 or Form 1005(S)), or

  • the borrower's recent paystub, and

  • IRS W-2 forms covering the most recent two-year period or the most recent two years tax returns with IRS Form 4137, Social Security and Medicare Tax on Unreported Tip Income, to verify tips not reported by the employer.

See  B3-3.1-02, Standards for Employment Documentation, for additional information.
Tip income may be used to qualify the borrower if the lender verifies that the borrower has received it for the last two years.
The lender must determine the amount of tip income that may be considered in qualifying the borrower. Refer to the Variable Income section of B3-3.1-01, General Income Information, for additional information.

Trust Income

The following table provides verification requirements for trust income.

✓ Verification of Trust Income
Confirm the trust income by obtaining a copy of the trust agreement or the trustee's statement confirming the amount, frequency, and duration of payments.
Verify that the trust income will continue for at least three years from the date of the mortgage application.

Unless this income is received monthly, documentation of current receipt of the income is not required to comply with the Allowable Age of Credit Documents policy.

VA Benefits Income

The following table provides verification requirements for income from VA benefits.

Note: Education benefits are not acceptable income because they are offset by education expenses.

✓ Verification of VA Benefits Income
Document the borrower's receipt of VA benefits with a letter or distribution form from the VA.
Verify that the income can be expected to continue for a minimum of three years from the date of the mortgage application. (Verification is not required for VA retirement or long-term disability benefits.)

Related Announcements

The table below provides references to the Announcements that have been issued that are related to this topic.

Announcements Issue Date
Announcement SEL-2022-09 October 05, 2022
Announcement SEL-2022-04 May 04, 2022
Announcement SEL-2021-11 December 15, 2021
Announcement SEL-2021-08 September 01, 2021
Announcement SEL-2020-07 December 16, 2020
Announcement SEL-2019-08 October 02, 2019
Announcement SEL-2019-07 August 07, 2019
Announcement SEL-2018-09 December 04, 2018
Announcement SEL-2018-08 October 02, 2018
Announcement SEL-2018-06 August 07, 2018
Announcement SEL-2017-06 July 25, 2017
Announcement SEL-2016–08 October 24, 2016
Announcement SEL-2016–05 June 28, 2016
Announcement SEL-2016–04 May 31, 2016
Announcement SEL-2015–10 September 29, 2015
Announcement SEL-2015–09 August 25, 2015
Announcement SEL-2015–07 June 30, 2015
Announcement SEL-2015–01 January 27, 2015
Announcement SEL-2014–12 September 30, 2014
Announcement SEL-2014–06 May 27, 2014
Announcement SEL-2013–07 September 24, 2013
Announcement SEL-2013–04 May 28, 2013
Announcement SEL-2012-13 November 13, 2012
Announcement SEL-2012–07 August 21, 2012
Announcement SEL-2012–04 May 15, 2012
Announcement SEL-2011–13 December 20, 2011
Announcement SEL-2010–16 December 1, 2010
Announcement SEL-2010–13 September 20, 2010
Announcement 09–19 June 8, 2009
1

An SSA Award letter may be used to document the income if the borrower is receiving Social Security payments or if the borrower will begin receiving payments on or before the first payment date of the subject mortgage as confirmed by a recently issued award letter.

2

Examples of how a borrower might draw Social Security benefits from another person's account/work record and use the income for qualifying:

  • A borrower may be eligible for benefits from a spouse, ex-spouse, or dependent parents (the benefit is paid to the borrower on behalf of the spouse, etc.); or

  • A borrower may use Social Security income received by a dependent (a minor or disabled dependent).

3

If joint tax returns or tax transcripts include income that is not associated with a borrower on the loan transaction, the lender must obtain additional documentation supporting the amount of income from the SSA being used in qualifying, such as the SSA-1099.

4

Confirmation of three-year continuance does not require documentation that provides a defined expiration date and can be assessed by verifying the SSA's requirements related to the specific benefit(s) being paid. For example, if the SSA ties receipt of the benefits to the beneficiary's age, confirmation of a three-year continuance can be met by verifying that the beneficiary's age supports that benefit(s) will continue for at least three years from the date of the loan application.

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Source: https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting-Borrowers/Chapter-B3-3-Income-Assessment/2367084091/Can-multiple-retirement-accounts-be-used-to-satisfy-the-three-year-continuance-for-retirement-income-paid-in-the-form-of-a-distribution.htm

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