Income
Income Continuity: Definition & Example
Also called: Continuance of income
What Is Income Continuity?
Income continuity is the likelihood that a source of income will keep being received in the future, often judged by its history and any known end date.
What does income continuity mean?
Mortgage guidelines commonly require that income be likely to continue for at least three years. A job with a steady history qualifies easily. Temporary disability payments ending in six months or child support that stops when a child turns 18 next year may not.
Continuity is judged from evidence such as length of employment, a contract end date, a benefit award letter, the age of dependents for support payments, and whether a deposit pattern has been consistent up to the present.
For rentals, continuity matters over the lease term. Income that is likely to continue for 12 months is usually what a landlord cares about.
Income continuity example
A borrower receives $1,200 per month in alimony. The divorce decree says payments end in 14 months. Because this is less than the lender’s three-year continuance requirement, the alimony is not counted as qualifying income.
Related terms
- Income StabilityIncome stability describes how consistent a person’s income has been over time, based on how regularly it arrives and how much the amounts vary.
- Recurring DepositsRecurring deposits are payments that land in a bank account on a regular, repeating pattern, such as a paycheck every two weeks or a monthly benefit, and are commonly treated as signs of ongoing income.
- Verification of EmploymentVerification of employment (VOE) is the process of confirming with an employer, or a database of payroll records, that a person works there, along with details like job title, start date, and sometimes pay.
- UnderwritingUnderwriting is the process a lender, insurer, or landlord uses to evaluate the risk of an applicant and decide whether to approve them, and on what terms.
