Not everyone has a traditional full-time job with a letter of employment and a 40 hour workweek. While it’s true that mortgage lenders prefer to deal with salaried clients, it’s entirely possible to qualify for a mortgage with an alternative form of income if you work with a mortgage broker like Perch.

Let’s explore some different types of income and the best practices for getting a mortgage if your income doesn’t fit the typical mold.

How to qualify for a mortgage with an alternative form of income

Providing documentation to your mortgage lender is a key step in getting qualified for a mortgage. Regardless of which lender you go with, you’ll need to provide supporting documentation to prove to your lender that your income is enough to support your mortgage payments and is ongoing. With a normal letter of employment and tax documents, lenders can reasonably assume that your income isn’t likely to change in the near future and are reassured that you’ll be able to pay your mortgage.

Recommended reading: What types of documents do you need to prove your income?

If you have an alternative form of income, for example if you’re self-employed or a contractor, you can still qualify for a mortgage, you’ll just need to work with your lender to provide supporting documentation for your income.

Recommended reading: Do you need a letter of employment to get a mortgage?

How to qualify for a mortgage as an independent contractor

Contractors often received payment for their work in cash, installments, or credit. The crucial factor for documenting this type of income is consistently depositing the money into a designated account. By maintaining a clear record of inflows and outflows, a contractor can demonstrate their income to a lender.

If you work as a contractor and receive cash payments for regular work, you should consider designating a specific account where you deposit that income. This way you can show records of this account with multiple months of consistent income to your lender. This, in combination with your income tax reports from previous years, will be enough proof of income for a lender to verify your ongoing income.

How to qualify for a mortgage if you’re self-employed

If you’re self-employed you’ll need to keep documentation of your earnings and expenses in order to prove to your mortgage lender that your income is consistent. In order to qualify for a mortgage, most lenders will require that you prove that your business was consistent and ongoing for at least 2 years. This means that you’ll need to provide your income tax statements for the past 2 years to your lender when qualifying for your mortgage. When qualifying for a mortgage as a self-employed individual your mortgage lender may require you to provide additional documents to prove your income.

  • Financial statements related to your businesses operation.
  • Previous years tax returns.
  • Ongoing revenue streams, such as contracts, or regular customers.
  • Proof of the existence of your business, such as an article of incorporation.

Our best recommendation for self-employed individuals looking to get a mortgage is to pay your taxes on time, and keep clear records for all your businesses income and expenses.

Other types of non-conventional income

Other than contractors, there are a number of other common income streams that might face challenges seeking traditional mortgage options. Commission-based earners such as real estate agents for example are usually asked to provide documentation supporting their history of commissioned earnings as well as income tax statements for the past 2 years.

Other types of careers with non-typical income sources could include:

  •  Online content creators such as YouTubers and streamers
  • Self practicing lawyers
  • Solo practitioner medical professionals
  • Mortgage brokers
  • Course instructors
  • Realtors paid on commision

If your income comes from a non-conventional job, our best advice is to keep records of your income, and file your taxes on time so that you have plenty of paper evidence to support your income.

Can I qualify for a mortgage with less than 2 years of income?

While generally most lenders require at least 2 years of documentation to support evidence of an alternative form of income like contract or commission work, working with an alternative lender can provide options. If you’re curious about what you can qualify for, sign-up for Perch and talk to one of our mortgage advisors who will help you plan the best strategy for you to qualify for your mortgage.

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