Using a Minister or Pastor Housing Allowance to Qualify for a Mortgage Loan

We Understand a Pastor’s Nontaxable Income

You are going to say “Amen, it’s about time someone understands my income!”.  Because our team fully understands how the pastor housing allowance may be counted for mortgage loans.  So whether you are a pastor, priest, or reverend, often you receive nontaxable income. But the problem is that lenders won’t count a large portion of your income.  This is such a popular issue among pastors, it is one of our most read articles.

Pastor Housing Allowance Explanation

Using pastor housing allowance as income to qualify for a mortgage
Using pastoral housing allowance as income to qualify for a mortgage

First, the IRS looks at the pastor housing allowance income as an exclusion from income. Therefore housing allowance is not reported as taxable income on the personal tax returns.  So this can be used for mortgage qualification even though it does not show on tax returns.  More than likely you are reading this article because a lender will not count pastoral housing allowance.  But again, we know how to help!

Pastor Housing Allowance Requirements

In order to count this nontaxable income on a purchase or refinance, we require specific documentation.  Most of the time these items are easily obtained from the church.  So here is the normal paper work we need to prove the nontaxable income source(s):

  • Breakdown of pastoral income on church letter head
  • Most recent 30 – 60 days of cancelled checks for the pastor housing allowance

There are usually other sources of income for pastors such as insurances, travel expense, or a car allowance.  Regretfully insurance or travel expenses are not allowed income sources.  But on occasion we have been able to document and use a car allowance to offset a car payment.  In order to accomplish this, guidelines require 24 consecutive months of cancelled checks from the church.

Pastor Housing Allowance Additional Information

The reason this topic is so popular is that many lenders will not count income omitted from tax returns.  On top of counting a pastor housing allowance as income, we will even gross it up to a higher amount.  We can do that since it is nontaxable, which helps lower a debt ratio!

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In addition, clergy housing allowance is not restricted to a particular mortgage program.  So pastors may purchase or refinance real estate using VA, FHA, USDA, or conventional home loans.

If you are a pastor looking to purchase or refinance real estate,

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Currently lending in all states except TX, NY, HI, AK

Written By: Russell Smith