- 1). Document your tips daily or weekly. Using a journal or a notebook, record the tips you will use to qualify for a mortgage and to pay taxes on your income.
- 2). Provide two years of income tax returns. To qualify for a mortgage using tip income, you will need to demonstrate two years of experience in your current line of work and a two-year history of earning tips. The earnings that you report to the Internal Revenue Service will be averaged over a two-year period.
- 3). Prepare a year-to-date earnings statement. Starting from January 1st of this year, add up your total earnings from tips. Your year-to-date earnings are added to your total earnings for the previous two years (as reflected on your tax returns), and are divided by the total number of months. This process will determine your monthly income for qualifying purposes.
- 4). Obtain a letter of continuance from your employer. You will need a letter that indicates that your income from tips is likely to continue.
- 5). Submit your documents to get pre-qualified for a mortgage. The methods for calculating non-traditional income can cause your lender to request many additional documents, such as bank statements, a professional license or diploma. For instance, a taxi driver may receive tips in addition to the fares reflected on the meter, and a hairstylist may also receive tips. A mortgage lender may require that a taxi driver present a license to prove that he derives income from driving a taxi. Additionally, the lender may view a hairstylist with a professional license or diploma as likely to continue operating and receiving tips.
- 6). Get a co-signer to help you qualify for your loan. If you're unable to prove all of your income, or you need additional income to qualify, try adding a co-applicant to your loan. A nonoccupant co-borrower would not be required to live with you; however, she would need to qualify for your loan.
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