You’re tired of renting and want to buy a home of your own, but where do you start? The first step is to get pre-approved in order to get an idea of how much you can borrow and the interest rate that you would have to pay. For mortgage lenders, this step helps determine whether a person has the capability to pay back a loan or not. To get pre-approved, lenders need to collect certain documentation demonstrating your sources of income and assets.

Providing the appropriate information will also help your home loan process go much smoother.

Some documents that can be used as proof of income for a home purchase or refinance are:

  • W2’s (last two years).
  • Bank statements (up to 6 months worth of statements).
  • Tax returns (last two years).
  • If planning to use child support or alimony for repayment, be sure to have documentation (filed with the court) showing that income will continue for at least three more years.
  • Two most recent year-to-date pay stubs.
  • If self-employed, quarterly or year-to-date profit/loss statement.
  • If receiving social security, disability, pension, death benefits, adoption assistance, public assistance, or other type of government assistance, you will need to have a copy of the benefit statement or letter stating the amount, frequency and duration of the benefits.  You may also have to prove that this source of income will continue for, at least, the next three years.
  • If you own rental property, you will need the last two rental agreements and last two tax returns.
  • Last three months of bank, brokerage, mutual fund, IRA/401K statements.
  • Copy of divorce decree or bankruptcy papers, if applicable.
  • If you are paid by commission, you will need the last two federal income tax returns with all schedules.
  • Corporate tax returns with all schedules, if applicable.
  • Declaration pages from your homeowner’s insurance.

This list is not inclusive and you may need to provide other documents depending on your situation. But now you should feel more prepared to move forward in the home loan process.

We hope this helped you understand how mortgage lenders verify income and assets during a mortgage or refinance process. If you have specific questions about your unique situation, don’t hesitate to contact us!

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