Qualifying for a Mortgage With Trust Distribution Income

Identify what the trust actually provides

Start with the amount, frequency, source, and terms of the distributions. A trust balance alone does not establish a monthly qualifying income.

Fannie Mae permits several forms of trust verification, including appropriate trust documents, trustee information, tax returns, or qualifying professional confirmation. The required evidence depends on the circumstances; a trustee letter is not the only possible document in every case.

Distinguish fixed from variable payments

Fannie Mae’s current policy treats fixed and variable trust payments differently. The required history, evidence of receipt, and income calculation should be checked against the actual distribution arrangement.

Continuance also depends on the income source. Fixed payments from a depleting asset can require evidence of at least three years of expected continuation. That is not a universal rule for every type of income passing through a trust.

Coordinate income and funds for closing

If trust assets will fund the down payment, closing costs, or reserves, disclose that plan during the income review. The same assets cannot be assumed to support unchanged future distributions after they have been withdrawn.

Ask your attorney or tax adviser about access rights and tax treatment. The mortgage review should use the documented arrangement rather than an informal promise that the trustee will provide whatever is needed.

Build the review package

• Relevant trust terms or acceptable verification documents.
• Records showing the amount and receipt of distributions.
• Applicable tax returns and current account information.
• The amount, if any, you plan to withdraw for closing.

Sources and program details

These references support the program details discussed above. The program selected for your loan and its current requirements control your application.

• Fannie Mae: trust income
• Fannie Mae: trust accounts