What we verified in “Buying a home with seasonal, tip or cash income”

Statements and where we checked them

The statements with rules, figures or dates, with the exact place in the source and the date we checked them.

1. According to HUD Handbook 4000.1, on an FHA loan the lender may only consider income that is legally derived and, when required, properly reported as income on your tax returns.

   Sources 1 · Handbook 4000.1 (last revised August 12, 2026), II.A.4.c.i, General Income Requirements (TOTAL), p. 223: 'The Mortgagee may only consider income if it is legally derived and, when required, properly reported as income on the Borrower’s Tax Returns' · Checked October 31, 2026

2. Under Regulation Z, the lender must verify the income or assets it relies on with reasonably reliable third-party records, and may use an IRS tax-return transcript; examples include copies of your tax returns, financial institution records, receipts from check cashing services and receipts from money transfer services.

   Sources 2 · 12 CFR §1026.43(c)(4): 'using third-party records that provide reasonably reliable evidence of the consumer's income or assets'; 'A creditor may verify the consumer's income using a tax-return transcript issued by the Internal Revenue Service (IRS)'; 'Copies of tax returns the consumer filed with the IRS or a State taxing authority'; 'Financial institution records'; 'Receipts from the consumer's use of check cashing services'; 'Receipts from the consumer's use of a funds transfer service' · Checked October 31, 2026

3. According to HUD Handbook 4000.1, seasonal employment is work that is not year round, regardless of how many hours per week you work; on FHA it counts if you have worked the same line of work for the past two years and are reasonably likely to be rehired next season; unemployment income in those months can also count if documented for two full years and reasonably likely to continue; and income is calculated as the average of the previous two full years.

   Sources 1 · Handbook 4000.1, II.A.4, 'vi. Seasonal Employment (TOTAL)', p. 226–227: 'employment that is not year round, regardless of the number of hours per week'; 'has worked the same line of work for the past two years and is reasonably likely to be rehired for the next season'; 'may consider unemployment income as Effective Income for those with Effective Income from Seasonal Employment'; 'document the unemployment income for two full years'; 'must average the income earned over the previous two full years' · Checked October 31, 2026

4. According to Fannie Mae's Selling Guide (B3-3.3-08, March 4, 2026), for seasonal income the lender asks for the verification of employment form, or your most recent pay stub and two years of W-2s, plus a verbal verification; a history of at least two years is required; income is averaged over the year to date and the two previous years; and seasonal unemployment can count if it is clearly tied to seasonal layoffs, expected to recur and reported on your tax returns.

   Sources 3 · Selling Guide B3-3.3-08, Seasonal Income (03/04/2026): 'a completed Request for Verification of Employment (Form 1005); or the most recent paystub and two years' W-2s. Additionally, a verbal VOE is required'; 'A minimum two-year history is required'; 'calculate an average income amount using year-to-date income, when present, and previous two years' earnings'; 'For seasonal unemployment compensation, the lender must verify that it is clearly associated with seasonal layoffs, expected to recur, and reported on the borrower's personal income tax returns' · Checked October 31, 2026

5. According to HUD Handbook 4000.1, on FHA tips count as income if you have received them for the past two years and they are reasonably likely to continue; less than two years can count if it is documented that you earned them consistently for at least one year; and the lender uses the lesser of the average over the previous two years (or the time you have earned them) and the average over the previous year.

   Sources 1 · Handbook 4000.1, II.A.4, 'v. Overtime, Bonus, or Tip Income (TOTAL)', p. 226: 'if the Borrower has received this income for the past two years and it is reasonably likely to continue'; 'less than two years may be considered ... consistently earned over a period of not less than one year'; 'the lesser of: the average ... over the previous two years or, if less than two years, the length of time ... or the average ... over the previous year' · Checked October 31, 2026

6. According to Fannie Mae's Selling Guide (B3-3.3-02, March 4, 2026), for tips the lender asks for the verification of employment form, or your most recent pay stub and two years of W-2s, plus a verbal verification; if your employer does not report your tips, you can give two years of tax returns with Form 4137 instead of the W-2; a two-year history is recommended, but 12 months can be enough with positive factors; and if the income declined, the lender must confirm it has stabilized or it cannot be used.

   Sources 4 · Selling Guide B3-3.3-02, Bonus, Commission, Overtime, and Tip Income (03/04/2026): 'a completed Request for Verification of Employment (Form 1005), or the most recent paystub and two years’ W-2s. Additionally, a verbal VOE is required'; 'For tip income not reported by the employer, two years’ personal tax returns with IRS Form 4137 may be provided in lieu of a W-2'; 'A minimum two-year history is recommended; however, income received for a shorter period, but no less than 12 months, may be considered'; 'Decreasing: The lender must confirm the current income level has stabilized after the decline; otherwise, the income is not eligible' · Checked October 31, 2026

7. According to the IRS, all tips, cash or not, are income and subject to federal income tax; cash tips include those paid by check, credit card or debit card; you must keep a daily record of your tips; you must report all cash tips to your employer, unless they total less than $20 in a month from that employer, by the 10th of the following month; you must report all of them on your return; if you did not report some to your employer, you use Form 4137; and a new law created a deduction for certain cash tips for 2025 through 2028.

   Sources 6 · Tip recordkeeping and reporting (last reviewed July 31, 2026): 'All cash and non-cash tips received by workers are income and are subject to federal income taxes'; cash tips include 'checks, credit cards, debit cards'; 'Employees must keep a daily record of tips received'; 'Report all cash tips to the employer, unless the total is less than $20 per month from that employer'; 'by the 10th day of the month after the month the tips are received'; 'Report all tips on the individual's federal income tax return'; Form 4137 for unreported tips; IRC 224 'provides a deduction for certain cash tips' for tax years 2025 through 2028 · Checked October 31, 2026

8. According to the IRS, income from gig or side work is reported on your tax return even if it is part-time or temporary, even if it does not come on a 1099 or W-2, and even if you are paid in cash.

   Sources 7 · Gig economy tax center, 'Gig economy income is taxable': 'You must report income earned from the gig economy on a tax return, even if the income is'; 'From part-time, temporary or side work'; 'Not reported on an information return form'; 'Paid in any form, including cash, property, goods, or virtual currency' · Checked October 31, 2026

9. According to Fannie Mae's Selling Guide (B3-3.6-06), a farmer's income is calculated on Schedule F of Form 1040; certain federal farm program payments, co-op distributions and insurance or loan proceeds may not be stable and may be one-time; and the lender can add back to your cash flow the deductions for depreciation, amortization, casualty loss, depletion or business use of your home that you claimed on Schedule F.

   Sources 5 · Selling Guide B3-3.6-06, Income or Loss Reported on IRS Form 1040, Schedule F: 'Income received from farming is calculated on IRS Form 1040, Schedule F'; 'certain federal agricultural program payments, co-op distributions, and insurance or loan proceeds'; 'may or may not be stable or continuous and could be a one-time occurrence'; 'adjust the borrower’s cash flow by adding the amount of any deductions the borrower claimed on Schedule F for depreciation, amortization, casualty loss, depletion, or business use of their home' · Checked October 31, 2026

10. Under federal law (18 U.S.C. §1014), anyone who knowingly makes a false statement or report to influence in any way the Federal Housing Administration or a mortgage lending business, among others, can be fined up to $1,000,000, imprisoned up to 30 years, or both.

    Sources 8 · 18 U.S.C. §1014: 'Whoever knowingly makes any false statement or report, or willfully overvalues any land, property or security, for the purpose of influencing in any way the action of the Federal Housing Administration'; 'a mortgage lending business'; 'shall be fined not more than $1,000,000 or imprisoned not more than 30 years, or both' · Checked October 31, 2026

11. According to the CFPB, the counseling agencies in its search tool are approved by HUD and offer independent advice, often at little or no cost, on buying a home, renting, defaults, forbearances, foreclosures and credit; you search by ZIP code; and not every agency offers every service.

    Sources 9 · Find a Housing Counselor: 'approved by the U.S. Department of Housing and Urban Development (HUD)'; 'offer independent advice, often at little or no cost to you'; 'buying a home, renting, defaults, forbearances, foreclosures, and credit issues'; 'Search by ZIP code'; 'Not every housing counselor offers all services' · Checked October 31, 2026