Commuting Distance Concerns
If an applicant’s location of their employment is not within a normal commuting distance from the subject residential property, the lender should assess the reasonableness of the mortgage loan, and must substantiate the expected consistency for future income considering the physical distance involved.
Income earned on an overtime bases should be included only if it is clearly demonstrated that such income is considered typical, and the amount of overtime is reasonable and expected to continue. The same holds true for a secondary employment. Expectations should be confirmed from historical documentation (prior tax returns, etc.).
Commission income may be included if it can be clearly demonstrated that the level of income shown will be supportable in the future. Generally, this would require a borrower to demonstrate that similar commissions have been earned (and documented) for the past two or more years.
Bonuses and/or profit-sharing allowances may be included into income where it is verified at similar levels for the past two or more years, and has the likelihood that these amounts will continue in the future.
Tips or Gratuities
Tips and/or gratuities may be included as income provided that this form of income is consistent, and is declared as income through personal tax returns with verification on tax assessment receipts for more than one year.
Legal Suite Rental Income
In many cases, up to 80% of the documented rental income (residence legal suite) may be added to an applicant’s earned income for qualifying purposes. There must be a reasonable expectation that this rental income will continue.
Income from investments in securities, bonds and the like, may be included if it can be demonstrated that similar income amounts have been available for the past three years, and is reasonably expected to continue. Should an investment income be considered as highly speculative, it would not normally be included.
Payments received for alimony and/or child support may be included into income where it is demonstrated over time that such payments have been fully and regularly made and are expected to continue on the same regular basis. Also note: When an applicant is the person obligated to make such alimony and/or support payments, the amount of those required payments should be deducted from that designated income.
Social Assistance / Employment Insurance
Payments from social assistance and/or employment insurance payment programs can only be included if those payments are demonstrated to be a normally cyclical income pattern. (Past examples might have included professional fishers in the Maritimes or loggers in BC.) These incomes should be confirmed over the past three or more years, and applicants must show that such income is reasonably expected to continue.