Section 8 Housing Choice Voucher Income: How to Use It to Qualify a Mortgage

Section 8 housing choice voucher income is a valid form of qualifying income on government and conventional loans when properly documented. Many MLOs are unfamiliar with how to source and document this income, leading to unnecessary declines on files that should close.

What Section 8 Income Is

The Housing Choice Voucher program (commonly called Section 8) provides rental assistance payments directly to landlords on behalf of eligible low-income households. Borrowers who receive these payments as landlords (not tenants) are receiving rental income from the Public Housing Authority. This income is documentable and usable for qualifying.

Documentation Required

• ✦A current Housing Assistance Payment contract between the landlord and the local Public Housing Authority
• ✦12 months of documented receipt of the voucher payments, typically via bank statements or PHA payment history
• ✦The HAP contract must cover a period extending at least through the next 12 months, or the lender must document the likelihood of continuation
• ✦Two years of tax returns showing the rental income is a condition on most lenders for this income type

FHA Guidelines on Section 8 Income

FHA requires that rental income be documented for at least 2 years if the borrower is using it to qualify. Section 8 payments received by the borrower as a landlord qualify as rental income. The HAP contract serves as evidence of the lease agreement and the income source. Vacancy factors still apply -- FHA typically allows 75% of the documented rent for qualifying.

Conventional Treatment

Fannie Mae and Freddie Mac treat Section 8 income as rental income with the same 2-year history requirement and 75% vacancy factor. The key distinction for conventional is that the HAP contract must show a remaining term of at least 12 months, or the lender must document that renewal is likely based on the PHA's standard contract renewal history.