Proof of Income – A lender wants to know that you’ll be able to repay the loan. At minimum you’ll need to show proof of steady income and provide last 2 year’s W-2 forms (if applicable), your most recent month of pay stubs, and your tax returns from the past 2 years (if you are self-employed or receive commissions).
Depending on your income history and the size of the loan, you may also have to show additional paperwork.
For example, getting a mortgage when you’re self-employed often requires even more documentation, like profit and loss statements from your business or 1099 forms if you work on a contract basis.
Earnings outside of a 9-to-5 – If you want to include income from other sources, you’ll need to provide detailed information about that, too. For example, someone who receives child support or alimony will likely have to provide a copy of the divorce decree and evidence of receipt of those funds. If you earn rental income from investment properties, you may be asked to provide a copy of the lease agreement along with tax returns.
Debts – No matter how much you’re earning, too much debt can seriously impact your debt-to-income ratio, which is a crucial component to determining your overall credit score. If you’re spending beyond your means, or you have a lot of high-interest debt, you’re less likely to qualify for the lowest rates on a mortgage. Examine all debts you have, including credit cards, student loans, car loans, alimony and child support payments. If you have a lot of outstanding debts, it might make sense to pay those down first before applying for a mortgage. If you’re unsure, you may review with a loan officer or credit counselor for advice.
Assets – An inventory of assets including bank statements, investment records, retirement accounts, real estate, and any other investments also make up a large part of your financial picture. The lender wants to be sure you have enough savings to weather any unexpected expenses after you close on the house. They may also want proof that you paid the down payment from your own account and not as a loan from someone else. If you received money towards the down payment as a gift, you may be required to provide documentation that declares it was a gift and not a loan.
Other paperwork – Depending on the lender, you may have to sign an IRS Form 4506-T, which allows the lender to get a transcript of the tax return from the IRS. In some cases, the lender wants to see that what you declared to them matches exactly what you declared to the IRS. The IRS Form 4506-T serves to verify that all of the data on your W-2, 1099 or 1040 matches what you said on your loan application.
Heritage Trust Home and Real Estate Lending offers members a wide variety of options. From first time home-buyers to rural housing loans, to lot/land programs and jumbo loans, it is our goal to work with members and find the right product to fit their individual needs. Our Home & Real Estate Professionals can walk you through the entire home loan process so you always know what to expect.
To get started or to learn more, click here!