Can I use my investment savings as a source of income to be considered for a loan?

Question

I'm currently receiving public benefits from the Social Security Administration and my state's Supplemental Nutrition Assistance Programme (SNAP). I've been on these programmes for many years. I've been able to secure temporary jobs to boost my income.

Because of the COVID19 situation, I was able to get a stimulus cheque, and I invested $1,000 of it in stocks and mutual funds with an on-line broker. I managed to pay off all my credit debt thanks to my most recent temporary job.

However, I still have a rental obligation debt that I need to pay back, so I've been working on increasing my chances of getting loan offers by boosting my credit scores and raising my income.

When they ask for total annual income, I usually convert it to monthly income. My benefits are currently less than $1,000/month. But I'm wondering what would happen if I added the $1,000 from the money I have saved up in investments.

I know that some articles, like this one say that you can be held liable if you knowingly lie about your income.

But in this case, I don't know. Maybe this is more of a legal question...?

Any answers would be greatly appreciated.

Answer 1

Savings are not income. Adding to savings is something you can do with income, but it's income regardless of whether you spend it or save it. (Returns earned on savings are income, but you don't seem to be talking about that.)

So the real question is not about your stocks and mutual funds, but about whether your stimulus check (all of it, not just the $1,000 you saved) counts as income for the purposes of a loan application. You could ask the lender. I suspect they will not want to include it, because it is likely non-recurring (i.e., it's not indicative of future income you would have during a loan term).

Also, government tax credits or refunds that reflect a reduction in tax liability are not generally considered income, just like discounts on things you purchase are not income. However, your stimulus was likely a credit with no associated liability. Even so, I think the main issue is that it's non-recurring.

Answer 2

It is generally possible to use investment income (and the investments), but - not at the extremely low levels you have. The general answer means you have to have collaterals you can use for the bank. I.e. getting a mortgage on an apartment building you own fair and square (i.e. without being laden with debt).

Stock Trading Income that is not LARGE and has a substantial time side is not worth even mentioning. The bank will not take your outlier couple of month profits and give you anything against that. Now, if you would own a multi million dollar stock portfolio and say "yeah, and I get all this dividend and I need a million dollar" the bank likely will say "ok, that stocks are worth X million dollar, we are ok borrowing you 25% in case of blue chips and for a quite decent rate". And here comes the money.

But a high risk trading activity based on a low value trading account (and seriously, thousands of dollars are extremely low value - not maybe for you, but the bank will not take the risk to end up with 19.95 USD per month in profits once all is taken into account) - no chance.

From what you describe you are a walking credit risk - even your temporary work seems to be low end from the income scale. Part of that is COVID, but - you actually depend on your stimulus check to generate credit worthiness. NOPE, not happening. Too much risk.