What percentage can non-taxable income be grossed up for loan qualification?

Non-taxable income can typically be grossed up by 25% for loan qualification purposes. This means that if a borrower has income that is not subject to federal income tax—such as certain types of disability payments, child support, or some types of Social Security benefits—lenders are allowed to increase that income amount to better reflect the borrower's financial capacity to repay the loan.

This gross-up is important because it adjusts the income to account for the fact that the borrower will retain a larger share of their earnings since they are not paying taxes on that income. For instance, if a borrower receives $1,000 in non-taxable income, grossing it up by 25% would result in an effective income calculation of $1,250.

The other percentage options provided do not align with the standard practices used in qualifying non-taxable income under industry guidelines. Thus, the 25% gross-up rule is the correct choice for accurately evaluating a borrower's financial status when considering non-taxable income in the context of mortgage qualification.