Using Disability Income To Qualify For A Mortgage

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut NMLS #65149

My friend Ed Silva commented on the blog that I wrote as an introduction to this series of difficult income source to use in qualifying for a mortgage, and suggested a couple of income source for a blog.  Since Ed took the time to comment and suggest topics, I will try to comply with his request.  I will address Ed's suggested income source, Disability Income first.

Using Disability Income To Qualify For A Mortgage is not easy, but it can be used.  The reason why it is not easy to Use Disability Income To Qualify For A Mortgage is because in most cases Disability Income is short term.  Qualifying for long term disability is not easy, and most of the time it requires applying for it several times before it is granted.  Just because it is expected that the Borrower's short term disability will result in long term Disability Income, does not mean that the short term Disability Income can be use to qualifying for a mortgage.

The dificulty in Using Disability Income To Qualify For A Mortgage, is in proving that the Disability Income is going to continue for at least 3 more years from the Closing Date of the mortgage.  I hope everyone is starting to see that 3 years of continued income is a magical number.  In proving that the Disability Income will continue for at least 3 more years the Borrower will need to provide the following:

  • Documentation that states an expiration date, which verifies that the remaining term of the Disability Income is at least 3 more years.
  • Verify the amount of disability payments.  This can be done by providing a copy of the Borrower's:
    • Disability Policy, or
    • Benefits Statement
  • Verify the Borrower's current eligibility through the benefit payer:
    • Insurance Company
    • Employer
    • Or other qualified disinterested party
  • If the Borrower is currently receiving Short Term Disability Income payments that will decrease within the next three years, because they are being converted to Long Term Disability payment.  Then the lower, Long Term Disability payment is what will be used to qualify for a mortgage

Providing the above proof and documentation to Use Disability Income To Qualify For A Mortgage may not seem very difficult, but I assure you it is more difficult that it may appear. 

Ed's second suggested Income Source was Self-Employed income.  This one is going to be more difficult to do in just one blog, but I will attempt to keep it to one blog and still provide enough information.

 

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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Re-Blogged 2 times:

Re-Blogged By Re-Blogged At
  1. Candice DeFore 09/19/2012 08:38 AM
  2. Jeana Cowie 09/19/2012 12:47 PM
Topic:
Lending / Financial
Location:
Connecticut
Groups:
Realtors®
Mortgages
1st Time Buyers
Real Estate Rookie
Tags:
disability income

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Rainmaker
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Rhonda Duffy
Duffy Realty of Atlanta & Rainmaker Realty - Milton, GA
#1 Retail Listing Agent in the U.S.

Where are we headed to? 

Sep 19, 2012 05:12 AM #1
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Lynn B. Friedman
Atlanta Homes ODAT Realty Call/Text 404-939-2727 Buckhead - Midtown - Westside -- Concierge Service - Atlanta, GA
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Dear George -

Your posts are the same as a wonderful school.
I am so glad to read your blog.

Have a happy day -
Lynn 

Sep 19, 2012 05:20 AM #2
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut - Middletown, CT
Your Connecticut Mortgage Expert

Rhonda, I am not sure what you are asking?

Lynn, thank you, and I am glad that you find the information helpful.

Sep 19, 2012 05:36 AM #3
Rainmaker
194,138
Brian Kuhns
Coldwell Banker Roth Wehrly Graber - Fort Wayne, IN
Fort Wayne Real Estate by Brian Kuhns

Great info George. I recently had a single mother with two disabled children that was able to use the disability income to buy her first home. It definitely helps to have a knowledgeable Mortgage consultant such as yourself working for your best interests

Sep 19, 2012 06:47 AM #4
Rainmaker
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Richie Alan Naggar Author PEARLS SERIES of books
People first then business! Ran Right Realty Riverside, Ca - Riverside, CA
on LIFE and LOVE plus Real Estate too!

If its coming in.....it counts as income....is very close to if it is breathing, make the loan and we all know where that went to

Sep 19, 2012 07:00 AM #5
Rainmaker
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Tim Lorenz
TIM LORENZ - Elite Home Sales Team - Mission Viejo, CA
949 874-2247

I did not it could happen but is not the best way to qualify.

Sep 19, 2012 08:42 AM #6
Rainer
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Beth Paterson
Reverse Mortgages SIDAC, NMLS #173899 - Saint Paul, MN
CRMP, NMLS #342859

George, while I only specialize in reverse mortgages, your post is very helpful... I'm always looking to learn and this may be useful when I get the calls from those who aren't old enough for the reverse mortgage but are disabled.  Thanks for sharing!

Sep 19, 2012 09:20 AM #7
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Paul McFadden
Paratex - Seattle, WA
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George: You continue to provide great information and it is appreciated. Keep up the great work!

Sep 19, 2012 09:39 AM #8
Rainmaker
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Chicago Real Estate
Goran Utvic | Chicagoland Brokers Inc, Chicago IL 60656 - Chicago, IL
Goran Utvic

Thank you George for the info...I have been asked by clients whether they can show Disability income as earned income to qualify for a mortgage. Good to know.

Sep 19, 2012 12:17 PM #9
Rainmaker
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Robert Hammerstein
Keller Williams Valley Realty - Hillsdale, NJ
Bergen County NJ Real Estate

George - This was a very pertinent post for us. Glad you posted this. Will pass this along to our customers.... Thanks Good information....

Sep 19, 2012 12:34 PM #10
Rainer
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Shane Barker
Amerifirst Financial, INC. - Salt Lake City, UT

I've had very similar trouble in the past.  Great post with great info!  Thanks.

Sep 19, 2012 03:12 PM #11
Rainmaker
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Evelyn Kennedy
Gallagher & Lindsey, Alameda, California - Alameda, CA
Alameda, Real Estate, Alameda, CA

George:

You posts about difficult income sources is so good.  I have bookmarked several and will go to your site to see what I missed.  Thanks for the info. 

Sep 19, 2012 03:46 PM #12
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Ed Silva
RE/MAX Professionals, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

George, I was looking for an educated answer and became not just a source of blog fodder, but a feature as well. I did have a disability client that got the mortgage but more of that was because of the size of the down payment

Sep 19, 2012 06:45 PM #13
Rainmaker
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Ginny Gorman
Phillips Post Road Realty ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in North Kingstown RI and beyond

Such a timely blog...i just got in with meeting with a couple where one of them has private disability insurance that is paying out to him & they want to buy next year!  thanks George

Sep 19, 2012 07:14 PM #14
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Frank Rubi
Frank Rubi Real Estate, LLC. - Metairie, LA
Homes for Sale Kenner - Metairie, La.

George, very good information. Do you think a client who is on SSDI vs. Private short term DI is a better candidate for a mortgage?

Sep 20, 2012 03:09 AM #15
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George Souto
George Souto NMLS #65149 FHA, CHFA, VA Mortgages Connecticut - Middletown, CT
Your Connecticut Mortgage Expert

Brain, I have had similar situations, and the disability income made the difference.

Richie, I am not sure what you meant by your comment, but disability income is very common and stable income.

Tim, disability income comes with more of a guarantee than regular income.  A borrower could be out of a job tomorrow, but once long term disability is granted it is there for the length of the disability, which is usually for life.

Beth glad that you found the information useful.

Paul thank you

Goran, disability is used all the time, and in some cases it can even be grossed up by 25%.

Robert, glad I could help.

Shane, short term disability can be tough to use, long term disability is easy to document and very stable.

Evelyn, glad that I was able to provide new information for you.

Ed, and I thank you for your help :) :) :)

Ginny as long as it is going to continue for at least 3 more years and they can document that, they should be able to use it.

Frank, yes because SSDI is long term and I have found it easier to document than private disability.

 

Sep 20, 2012 05:38 AM #16
Rainmaker
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Sandy Acevedo
951-290-8588 - Chino Hills, CA
RE/MAX Masters, Inland Empire Homes for Sale

Great job George, on explaining this complex topic. It was news to me and I appreciated it!   

Sep 20, 2012 10:16 AM #17
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