Most Lenders take full advantage of an automated underwriting
system that allows them to request as little information
as possible to verify the data you provided during your
loan application. Gone are the days when it was necessary
to verify every piece of data collected during the application.
The automated underwriting system compares your financial
situation with statistical data from millions of other
homeowners and uses that comparison to determine the
level of verification needed. In many cases, a single
W-2 or pay stub can be used to verify your income or
a single bank statement can be used to verify the assets
needed to close your loan.
In order to fully assist you, your lender is going
to need to reference some important documents. You might
want to start with your W-2 forms and federal tax returns
for the past 2 years, year-to-date pay stubs, documentation
of additional income, investment records, debt/creditor
records and cancelled mortgage/rent checks.
Listed below are some documents that may be required
during the mortgage application process (some loan programs
may require additional information). To get the ball
rolling and make the entire application process much
smoother, you can get a jump start on organizing them
before you speak with your mortgage professional. Remember
to make a copy of everything, and keep the original
documents in a safe place.
In order to verify your employment, your lender may
require the names, addresses and telephone numbers of
all your employers for the last two years. If you are
self-employed, your business records and tax returns
for the last three years may be requested.
Your W-2 form is sent from your employer and used to
file your income taxes. Generally, you will need to
produce your W-2s for the past two years.
Pay Stubs and Additional
It is important to save your pay stubs, for at least
a 30-day period before your mortgage application. Documentation
of additional income information, such as Social Security,
pension, interest or dividends, rental income, child
support, alimony, and self-employment income may also
Federal Income Tax Returns
If you are self-employed, or more than 25% of your income
comes from commission, overtime or bonuses, you may
need to provide complete copies of federal income tax
returns you filed for the two most recent years. In
some cases, you may be required to provide 2 years of
business tax returns and a year to date profit &
You may need to provide statements from all of your
accounts (checking, savings, mutual funds, money markets,
certificates of deposits, 401k or other retirement accounts)
for the last two months to verify the funds available
for your down payment.
Be prepared to provide the account numbers, current
balances and the minimum monthly payments of all credit
accounts, such as loans, credit cards, child support
and other payments you make each month.
You will need to provide a copy of your homeowner’s
insurance declaration page for the subject property
in refinance transactions. If you own multiple properties,
it may be necessary to provide insurance statements
for each property that you own. For purchase transactions,
you will need to purchase a new policy and provide the
lender with verification of coverage.
Property Tax Bills
If you own multiple properties, you may need to provide
property tax bills for each property so that the lender
may accurately assess your total monthly obligations.
You can borrow funds to use as your down payment! However,
any loans that you take out must be secured by an asset
that you own. If you own something of value that you
could borrow funds against such as a car or another
home, it's a perfectly acceptable source of funds. If
you are planning on obtaining a loan, make sure to include
the details of this loan in the Expenses section of
the application. Further, make sure you provide documentation
of the note (i.e. copy note including monthly payment)
Pension or Social Security
If part or all of your income is derived from your pension
plan or Social Security, you may be required to provide
recent pension check stubs, or bank statement if your
pension or retirement income is deposited directly in
your bank account. Sometimes it will also be necessary
to verify that this income will continue for at least
three years since some pension or retirement plans do
not provide income for life. This can usually be verified
with a copy of your award letter. If you don't have
an award letter, the lender can contact the source of
this income directly for verification.
If you're receiving tax-free income, such as social
security earnings in some cases, the lender will consider
the fact that taxes will not be deducted from this income
when reviewing your request.
Non Reported Income
Generally, only income that is reported on your tax
return can be considered when applying for a mortgage.
Unless, of course, the income is legally tax-free and
isn't required to be reported.
Some lenders may offer a stated income program, which
means that you can be qualified for a loan based on
the income you state rather than that which can be verified.
Usually these programs require larger down payments
and offer interest rates that are substantially higher
than regular mortgage rates.
If you own rental properties, the lender will generally
ask for the most recent year's federal tax return to
verify your rental income. They will review the Schedule
E of the tax return to verify your rental income, after
all expenses except depreciation. Since depreciation
is only a paper loss, it won't be counted against your
If you haven't owned the rental property for a complete
tax year, the lender may ask for a copy of any leases
you've executed and we'll estimate the expenses of ownership.
Dividend and/or Interest
Generally, two years personal tax returns are required
to verify the amount of your dividend and/or interest
income so that an average of the amounts you receive
can be calculated. In addition, the lender will need
to verify your ownership of the assets that generate
the income using copies of statements from your financial
institution, brokerage statements, stock certificates
or Promissory Notes. Typically, income from dividends
and/or interest must be expected to continue for at
least three years to be considered for repayment.
Child support, Alimony or
Separate Maintenance Income
Information about child support, alimony, or separate
maintenance income does not need to be provided unless
you wish to have it considered for repaying this mortgage
loan. If you need this income to be considered, expect
to provide copies of checks, divorce decree, and/or
court documents verifying the child support and/or alimony