Can someone else use your income to qualify for a mortgage?

By Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience

Edited by Michael Jensen, Mortgage and Finance Guru

Updated October 20, 2020

The short answer to your question is that someone else cannot use your income to help them qualify for a mortgage. There are other ways, however, that you may be able to help them get approved for the loan, which we outline below.

When you apply for a mortgage, lenders require that you verify your employment and income with documents such as pay stubs, W-2s and tax returns. The documents must be in your name for the lender to include the income in your loan application.

Simply put, if you do not earn the income then you cannot use it to qualify for a mortgage under most circumstances. Even if your income is deposited into the same bank account as the person who applies for the mortgage, the lender does not consider the income when the person applies for the loan.

Lenders want to use permanent, stable income to determine the mortgage you qualify for which makes relying on someone else’s income is not feasible. You may have access to that income today but circumstances may change and you may not have access to those funds in the future.

Now that you understand why someone else cannot use your income when they apply for a mortgage we also want to review ways you can help them get approved.

Co-Borrower on Mortgage

If you want to use your income to help someone qualify for a mortgage then you can be a co-borrower on the loan. In this scenario you are on the loan and your income and monthly debt payments are included in the application.

If you have good income and relatively low debt expense, being a co-borrower should enable you and the other applicant to qualify for a higher mortgage amount. Please note that the lender also evaluates your credit score and employment history when they review the loan application.

Use ourTWO PERSON MORTGAGE QUALIFICATION CALCULATORto determine what size loan co-borrowers can afford

The downside to being a co-borrower on someone else’s mortgage is that the monthly payment is included in your debt-to-income ratio when you apply for loans in the future. This can make it more challenging for you to access credit or qualify for your own mortgage.

Additionally, because you are on the mortgage, if something negative happens such as a missed payment, default or foreclosure, your credit score is adversely impacted. In short, you need to understand the responsibility and commitment involved in being a co-borrower.

The table below shows mortgage rates and fees for leading lenders in your area. We recommend that you shop multiple lenders to confirm their qualification requirements and to find the best mortgage terms.

Non-Borrower Household Member

If you intend to live with the person applying for the mortgage then he or she may be able to use the HomeReady Program and use you as a non-borrower household member. In this scenario, you are not a co-borrower on the mortgage but your income is used as a supporting factor to help her or him qualify.

Review our HomeReady Mortgage Guide

For example, if an applicant is borderline in terms of being approved for a specific mortgage amount, then income from a non-borrower household can be a positive factor. Unlike being a co-borrower, your income is not added to the applicant’s income but it can still provide a helpful nudge.

Benefits of this approach include not including the monthly mortgage payment in your debt-to-income ratio, which makes it easier for your to qualify for a mortgage in the future. Plus, your credit is not exposed if something goes wrong with the loan.

The negative of being a non-borrower household member is that the applicant likely qualifies for a smaller mortgage amount than he or she would if you are a co-borrower. The applicant also needs to qualify for the HomeReady Program and the mortgage on their own as a sole borrower, which is another important consideration.

Down Payment Gift

Another way you can help someone qualify for a mortgage is to provide a down payment gift. In this case, the gift may enable the person to afford to buy a higher priced property or meet the minimum down payment requirement.

Making at least a 20% down payment enables you to qualify for the lender’s best mortgage terms and you avoid paying private mortgage insurance (PMI). Both of these reduce your monthly payment and potentially increase the mortgage you can afford.

Please note that if you give someone a down payment gift, it must truly be a gift and not a loan that needs to be repaid. Additionally, lenders apply specific guidelines for down payment gifts and you are typically required to provide a letter that outlines the source of funds for the gift. In some but not all cases lenders also request financial documents from the gift provider.

In closing, although someone else cannot use your income when they apply for a mortgage, there are multiple ways you can help them qualify for the loan. Make sure to understand the positives and negatives of each alternative so that you can select the approach that is right for you.

Sources

"B3-3.1-01, General Income Information."  Selling Guide: Fannie Mae Single Family.  Fannie Mae, August 7 2019.  Web.