Social Security disability income protects individuals no longer able to work at the same prior level. In the past lenders had difficulty in meeting a mortgage loan approval. This requirement included proof that the income “should” continue for at least 3 more years from closing. But now this practice is not allowed as per the Consumer Financial Protection Bureau (CFPB) as it is considered discriminatory. Mortgage companies define a source of income as “current documented income that is likely to continue for at least 3 years from closing”. Well there are protected classes and the disabled is an important one.
Common Social Security Disability Income Issue
We have a recent example that represents common questions we receive. So a buyer asked questions about the purchase of a home. She had talked to several mortgage lenders. She let us know that both she and her husband receive SSI disability income. Plus she mentioned they don’t make much money per her description of their situation. Because of conversations with the other lenders, she was familiar with debt ratios and other qualifying areas.
One comment that we made surprised her though. After she stated she can prove they have permanent disability, we stopped her. We told her that we do not need proof that her disability will continue. Furthermore we just need to prove that they receive the income by an award letter and bank statements to prove receipt. “But the other lenders said I need a doctors signed letter!”, she said. “Not anymore” we replied. Thankfully, it is not required or even allowed anymore. So therefore, we are writing and sharing this blog as it is very important for lenders to remember. Most importantly, the goal is to help disabled know how this income may be counted.
The above scenario is protected by The Equal Credit Opportunity Act (ECOA) and its implementing regulation, Regulation B. Keep in mind that this rule applies to Social Security and not for incomes that are more temporary in nature such as Workers Comp. Although, workers comp could potentially be counted.
If you have a question about qualifying with your special income situation, please contact us for help.
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Remember this article is not providing tax advice. So please involve a tax professional when considering gifting real estate or money.
Author: Russell Smith
Team Move OVM Financial loan officer success is Russell’s primary focus. He provides the tools and techniques he used as a top producing loan officer. Additionally he offers the Team Move OVM Financial Agent Training Program. Sharing is so important to Russell so he works diligently to be a resource to loan originators and Realtors.