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What Documents Do I Need When Applying For A Mortgage

happy homeowners talking to loan officer about documents required mortgage application

One of the most common questions a loan officer receives from a homeowner is, “What documents do I need when applying for a mortgage?”. It’s a great question, and the answer will vary somewhat depending on your income source and the transaction. There are standard items, and I will cover what those are and also provide you with four industry-pro tips to ensure a fast and easy loan approval.

W-2 Wage Earner Income Documentation

Here are the income documents you’ll need to provide if you are an employee that receives a W-2 each year.

  • Paystubs that cover 30 days. This means you’ll provide four pay stubs if you are paid once a week. You’ll provide two pay stubs if you are paid every two weeks.
  • Your most recent W-2 or possibly your two most recent W-2s.

If you are a monthly salaried employee, the underwriter will calculate your income based on the amount you receive each month before any deductions are taken out. So if you make $7,500 per month (gross), that is what the underwriter will use to calculate your income.

It’s a bit different if you are an hourly employee. Your income will vary weekly, so the underwriter will use an average based on your two paystubs and the W-2s you provide.

Overtime Income 

If you receive overtime income and it’s needed to approve your loan application, the underwriter will most likely request a Verification of Employment (VOE) from your employer. The form asks the employer to verify your hourly income and overtime income for the current and previous two years.

Most underwriters will require that you have a two-year history of receiving overtime income (at a similar level each year). If you don’t, the underwriter might reject using your overtime income.

Commission Income

If part or most of your income comes from a commission structure established by your employer, be prepared to provide some additional documentation. Also, like overtime income, the underwriter will request that your employer complete a VOE documenting your current commission income and the previous two years.

If You Own Rental Property and/or Have a Side Gig

If you have one or more rental properties and/or a side gig that generates income, the underwriter will request your two most recent tax returns.  Positive income will help with approving your loan application, and if you are losing money, that might negatively impact your loan application.

Self-Employed Income Documentation

For those who are self-employed, including persons who receive a 1099, here is the income documentation you’ll need to provide to underwriting.

  • You have the two most recent years of your personal tax returns and the two most recent years of your business returns. If you received a K1 for either of those years, you must also provide that.
  • A current year’s Profit and Loss statement. And if you’ve not done your taxes for the most recent year, then a Profit and Loss statement for that year as well (unaudited).

These basic income documentation requirements are standard with most lenders. And if you’ve been in business for five years or more, you may only need to provide one year of personal and business returns, along with a Profit and Loss statement. 

Some additional documentation you may need to provide

  • Business bank statements covering the 60 days showing current income deposits.
  • A copy of your business license.
  • A letter from your CPA confirming your business is still active.

And if you own rental property, your income and expenses from the property are listed in your tax returns.

W-2 to Self-Employed, Is That Ok?

It’s not uncommon to see someone transition from a W-2 employee to a 1099 “employee” or a W-2 employee starting their own business. This is usually done when someone feels they can earn more money by being self-employed. 

When it comes to underwriting, this is a problem, and you’ll have to wait until you can show two years of tax returns before an underwriter will approve the loan application. Most businesses fail, and lenders know this, so underwriting guidelines require at least two years of stable self-employed income before an underwriter will approve your loan application.

Retired Income Documentation

Here are the income documentation requirements for homeowners who are retired.

  • Social Security Income benefits statement.
  • If you receive pension income, then your annual benefits statement.
  • If you receive income from your investments, then two monthly or quarterly statements show the total amount invested and recent disbursements.
  • Your two most recent months of bank statements showing your retired income being deposited into your account.
  • It’s possible that you will need to provide your tax returns for the past two years. 

When receiving income from your investments, like a 401k or an IRA account, underwriters will want to see if the current income will continue for at least three years. So, if you receive $4,000 a month from your 401k, the underwriter will want to see a balance of $144,000.00 or more in your 401k. 

If your balance is under the three-year minimum, the underwriter will likely turn down your loan application.

Alimony Income Documentation

If you receive alimony, the underwriter will require you to provide your legal documentation, your tax returns, and your two most recent bank statements showing the exact amount deposited in your bank account. 

Non-Income Documents You’ll Need To Supply

You’ll need to provide more than your income documentation to an underwriter. Here are examples of additional documentation an underwriter may request.

If You Own Additional Property

If you own additional property, the underwriter will request the following for each property;

  • Lease agreement.
  • Mortgage statement.
  • Property insurance statement.
  • If the property has an HOA, then documentation showing the monthly, quarterly, or annual amount.

If you don’t have a lease agreement, the underwriter will most likely request a copy of the twelve most recent rent checks you received.

Are You Legally Separated or Divorced?

If you are legally separated or divorced, the underwriter will request your separation agreement or divorce decree if you are legally separated or divorced.

Do You Pay Child Support?

If you pay child support, the underwriter will require you to document the length of the child support and the amount via a court order or other legal document.

Did You Buy A Car or Open A New Credit Card That Doesn’t Show Up on Your Credit Report?

If you just bought a car or opened a new credit card, you’ll need to document the account for the underwriter. The original documentation showing the terms should suffice if it’s a car loan or lease.

If it’s a credit card, that might be tricky since most people cannot provide the “terms,” and if that is the case, you’ll need to wait until the first statement is issued.

How Are Cryptocurrencies Handled For Reserves or a Down Payment?

Cryptocurrencies can be tricky when it comes to documenting ownership. The best thing to do is to liquidate your position ninety days before you need the funds so that they have a full 60 days of seasoning in your bank account.

If that is not possible, contact your loan officer to find a solution since this will vary from lender to lender.

Industry-Pro Tips When Sending In Your Documentation

Here are some industry-pro tips when sending in your documentation.

Only Send In What The Loan Officer Requests

I can’t stress this enough, only send in what the loan officer is asking for and not a substitute unless the loan officer approves of your proposed substitute. If you are a W-2 employee that can’t find your W-2, don’t send in your tax returns, it will not replace your W-2 requirement. Contact your employer and ask them to reissue your W-2.

When supplying bank or investment account statements, don’t substitute your two monthly statement requirement for a transaction history covering the previous sixty days. The underwriter will not accept it, and you’ll do additional work.

Make Sure Your Documentation Is Complete

This is a key part of sending in documentation; ensure your documentation is 100% complete. If the underwriter requests a bank statement, and your bank statement has twenty-two pages, send in all twenty-two pages, even if they are blank or have general disclosure information.

  •  W-2 employees, ensure the entire you provide the entire W-2 rather than a partial one.
  • When sending in your tax returns, send in the entire return…not just the first few pages. All pages, all schedules, including the worksheets.
  • If you have retirement income, send in all the pages of your benefits statement.

Also, make 100% certain that all the information in the document is fully visible, not cut off on the sides, top/bottom, or corners. Underwriters are required to view the complete document without any missing parts.

Double Check To Make Sure Your Documentation Is Clear

If you send in crisp, clear documentation where all the information is easy to read, you’ll make your underwriter happy. If your documentation is blurry and hard to read, the underwriter will reject the documentation and request that you resend a clearer version of the documentation.

Avoid doing extra work, and send in a clear, easy-to-read document.

Do Not Alter Your Documentation

Never, ever alter your documents. If there is an error in your documentation, contact the institution that issued the document and ask them to reissue a corrected document. Also, do not “blackout” account numbers, transactions, social security numbers, or any other information in your documentation. If you do, the underwriter will reject the document.

Send In The Right Documentation For A Fast Loan Approval

Every homeowner wants a fast loan approval. One of the best things a homeowner can do to ensure that is to supply the underwriter with exactly what is requested and ensure your documents are complete, clear, and easy to read. If you are working with an experienced loan officer, they will generally know up front what the underwriter is looking for when reviewing a loan application.

If you have questions and/or need to find a substitution for a document, contact your loan officer immediately so that they can find a quick resolution.

Disclaimer: The above is provided for informational purposes only and should not be considered tax, savings, financial, or legal advice. All information shown here is for illustrative purpose only and the author is not making a recommendation of any particular product over another. All views and opinions expressed in this post belong to the author.

Kevin O'Connor

Written By Kevin O'Connor

Loan Officer Kevin O’Connor has over 17 years of experience as a Mortgage Loan Originator. He is fully licensed with the California Department of Real Estate and the Nation Wide Multistate Licensing System (NMLS). He has worked with thousands of homebuyers and homeowners over the course of his career. From first-time homebuyers to experienced property investors, he has earned the reputation of putting his client’s priorities first. He is a trusted advisor who has a wealth of knowledge and expertise.
Jeff Levinsohn

Reviewed By Jeff Levinsohn

Jeff is the CEO of House Numbers and a home wealth management geek. He’s obsessed with tools and information that empower homeowners to save money, access their home equity, and build long-term wealth.