What to provide: Most lenders accept the following documents to support income used –
Most recent 2 years 1099. If you receive retirement/pension income from multiple companies, remember to provide all of them to lenders.
Award letter. This is the best source of documentation to provide and widely accepted by ALL LENDERS without requesting additional documentation.
Most recent 2 years tax return
In an event that all (or part) of your income received is non-taxable, you can always ask lender to gross up your qualifying income if your loan is running into a debt-to-income ratio issue. For example, if you receive $1500 in social security income and the entire income is non-taxable, lenders can gross it up by 1.25% and qualify you with it. In this example, your qualifying income will be $1875 ($1,500 x 1.25). Keep in mind, though, it must show up as a non-taxable income entirely (or partially) on your most recent tax return.
Any specific question on this, feel free to drop me a comment.