Do Food Stamps Count as Income for a Mortgage?

Purchasing a home involves a significant financial commitment. Lenders assess an applicant’s ability to repay a mortgage, with income serving as a primary factor in this evaluation.

Understanding Income for Mortgage Qualification

Mortgage lenders thoroughly evaluate an applicant’s income to determine their eligibility for a loan. They focus on income that is consistent, verifiable, and expected to continue into the future. Common income sources include wages, salaries, self-employment earnings, retirement benefits, and disability payments.

Lenders typically use an applicant’s gross income, the amount earned before taxes and other deductions, when calculating eligibility. This gross amount determines the debt-to-income (DTI) ratio, a key metric comparing monthly debt payments to gross monthly income. A lower DTI ratio generally indicates a stronger ability to manage additional debt, making an applicant more favorable. For income to be considered, it usually requires a history of receipt, often two years, though shorter periods may be accepted with positive compensating factors.

Food Stamp Benefits as Qualifying Income

Food stamp benefits, officially known as Supplemental Nutrition Assistance Program (SNAP) benefits, can be considered as qualifying income for a mortgage under specific conditions. Lenders must verify these benefits are consistent, have a history of receipt, and are likely to continue for a defined period, typically at least three years. The Consumer Financial Protection Bureau (CFPB) confirms that lenders cannot discriminate against applicants receiving public assistance income, but they can assess its likelihood of continuation.

Because SNAP benefits are non-taxable, mortgage lenders may “gross up” this income to align it with taxable income for debt-to-income ratio calculations. This process involves increasing the actual benefit amount by a certain percentage, often 15% to 25%, to reflect the equivalent pre-tax income. For example, $1,000 in monthly non-taxable SNAP benefits could be considered as $1,250 of qualifying income with a 1.25x gross-up factor. This adjustment helps level the playing field, as borrowers with non-taxable income effectively have more spendable income. This can improve an applicant’s debt-to-income ratio, potentially increasing their borrowing capacity.

Documenting Benefits for Loan Application

To include food stamp benefits as qualifying income for a mortgage, applicants must provide thorough documentation to the lender. This ensures the benefits are legitimately received and are likely to continue.

Applicants should gather award letters from the issuing agency, which confirm the benefit amount and the period for which they are granted. Benefit statements, often provided periodically by the state or federal agency, also serve as proof of ongoing receipt. Bank statements showing consistent direct deposits of the SNAP benefits into an account are valuable for demonstrating a reliable payment history.

The Mortgage Application Process

After gathering all necessary income and financial documentation, the mortgage application process involves several distinct stages. The initial step is submitting the complete application along with all supporting documents to the chosen lender.

Following submission, the lender begins a detailed review, which includes an underwriting phase where all provided information is assessed. Underwriters scrutinize income, assets, credit history, and debt obligations to determine loan eligibility and terms. During this period, the lender may have follow-up questions or request additional verification regarding income, including benefit payments.