Release of Financial Information
Applying for a mortgage isn't easy. Lenders require paperwork that verifies every facet of your financial life: taxable income, assets, rent payments and more.
We offer the following list of items you may need to document income.
Paycheck stubs and W-2s to prove income
Loan guidelines typically specify one month of verified income. You can prove this with paycheck stubs. Employees that are paid electronically may be able to access a corporate website to print out paycheck stubs.
Guidelines typically require the most recent Form W-2, but some borrowers are asked for two years of W-2s.
If your loan hasn't closed by the time that new W-2s should be received by the employees, then (the lender) may ask for that.
Bank, investment and tax documents
Borrowers generally must supply bank and investment account statements for the past 30 days.
Almost everyone is expected to provide a recent tax return, including all the pages and schedules.
Borrowers also must sign IRS Form 4506-T, which allows the lender to get a transcript of the tax return from the IRS. This practice has become an industry standard as fraud prevention.
Tax returns are scrutinized for unreimbursed employee business expenses, self-employment business losses and telltale signs of loan fraud, such as reported income that doesn't match an employee's W-2.
Don't try to amend a prior year's tax returns to show more income. That's now a no-no.
Profit statement (if self-employed)
Self-employed borrowers may have to submit a current-year profit-and-loss statement, especially if the year is more than half over or they haven't filed their prior year's tax return.
In the midst of the housing boom a decade ago, many self-employed borrowers were able to get loans with little or no income documentation, but no more.
Proof that a gift isn't a loan
Borrowers who receive a cash gift toward their down payment should be prepared to provide a letter from the giver that declares the gift isn't a loan. A copy of the giver's bank account statement showing the funds, a canceled check and the borrower's own statement showing the funds also may be required.
These guidelines are much stricter than they used to be, especially for borrowers who want to get a loan insured by the Federal Housing Administration.
Other required documents
Renters must supply 12 months of canceled rent checks and bank statements showing the rent was paid on time. Renters without that documentation can provide the landlord's name and contact information for payment verification.
Borrowers also may be required to provide a copy of a divorce decree, proof of a child's age if child support is counted as income, bankruptcy discharge papers and more. Lenders also may demand letters that explain negative items on a credit report or verify the borrower's motivation for the loan, Miller says.
Loan documentation tips
Bring in documents early. Doing so can speed up the process. Also, never cross out, white-out or alter any information on a document.
Always provide every page of every document -- even the pages that say "This page is blank."
Finally, remain ready to supply updated documents. "Documents expire after 60 days," Blackwell says. "So if homebuyers take a long time in their house-hunting effort, we won't need the whole thing again, but they will have to bring the most current paycheck and that type of thing."