Last week I MIGHT have mentioned how important documents are to getting our clients prequalified.  We just can’t do it without them.  So, this week I wanted to spend a little time going over the documents that everyone will need, and some that we might need in specific situations.  That way you are prepared and can find (or sometimes even request) those documents right when you start the application process.  It speeds up everything if you are ready to go with the paperwork!

So here we go!!

Identification

We need 2 forms of ID for each borrower.  MOST people use their driver’s license and social security card, however there are LOTS of alternatives if you don’t have these and you can find a full list at the bottom of this section of the article.

Some things to know about IDs:

Only one of the IDs needs a photo.  It’s ok if both do, but one photo is required.

Any ID that has an expiration date, like your license MUST not be expired.  If you have an expired ID you’ll either need to go get that taken care of, or give us another ID we can use.

Some documents can serve double duty:  For example:  if you are a Native American, we will need that CDIB or certification letter from your tribe if we go with a loan program like HUD 184.   Use this for your ID as well, 2 for the price of one!

Why do we need these?  We want to make sure you are who you say you are.  We will need this and the title company that closes you (when we sign the closing documents) will need these IDs too. And we will match names, spellings, identifying numbers, etc throughout the loan process so it’s not only ID, but also serving purpose BEHIND the scenes.

List of Eligible IDs

Documents for Income

The documents we need for income are going to depend on the KIND of income you receive and the program.  Some loan programs won’t need all these (some can get by with only one paystub and one w2 OR a verification instead of the w2) but we’re listing all of the document types that are most common and that a large percentage of people will need.  Again, I’ll mention, we will give you YOUR specific list when we’ve reviewed your application.  This is just to get an idea:

If you work a regular job as an employee and you get paystubs each payday, yours is the easiest and most straightforward kind of income to document.  For you we need:

• The most recent paystubs for each borrower (and depending on loan type, we may need the most recent 30 days when it’s time for underwriting.)

• 2yrs of your most recent tax returns & the w2s that go with them will be needed for MOST borrowers.

Do you get bonuses, commission, or overtime?  Your employer needs to verify that it is likely to continue and I’ll need a two-year average to use this.

SPEAKING OF THOSE VERIFICATIONS:

We need

Employer information:  I will need to verify your income information with your employer so providing address, phone number, email if you have it and/or any Salary Key or Employer Codes for verification services like the Work Number as applicable.  Verifications are important, especially If you receive overtime, bonuses or other variations in your income.  They will tell us if that is likely to continue so we can know if we should include that in your income calculations, or just your normal rate of pay.

What other kinds of income do you receive? 

Do you get child support or alimony? A copy of the court order will document that or an alternate documentation is proof of payments for the last 12 months,

And that is IF you want to use this as a source of income AT ALL, just know you aren’t  required to and you can use this income source at your discretion… my team and I will help walk you through the pro’s and con’s so you can determine when we’re consulting after application.

Do you have a side hustle or 2^nd job?  If you’ve worked there or received this income for more than a year, I can usually include it but it will depend on several factors…just let me know you have this income and how you are paid.

Do you receive rental income from another property that you own? This counts! (how it is documented can vary depending on several factors, but We’re JUST about to talk about income from assets in just a moment.)

Of course there are lots of exceptions for each of these we’ve talked about…have I mentioned the loan process is very unique for every transaction? Maybe you are starting to see why.  This is why the interview after application is so important.  We need to talk to YOU about YOUR information.  NOTHING is cookie cutter in the loan process and treating you like you’re on an assembly line is setting you up for disaster later. 

Now let’s talk about Retirement & Disability Income

If you or someone in your household receives income from Social Security, Supplemental Security (SSI), Disability or Retirement Funds, it may be coming from multiple streams and can be confusing. We need documentation from EACH stream of income if you are getting multiple checks. 

• We need the most recent award letters for each borrower from each income source

Social Security/Spousal or Survivor Benefits: 

• Awards Letter for the current year. 

This tells us how much you receive in benefits. 
You should have received this in the mail but if you can’t find it, start by clicking HERE 

Disability Income:  This may come from one or more sources, but you should receive awards letters for each source.  Social Security only allows 100% disability, but other sources like the VA may send partial benefits.  It’s possible that you are receiving from more than one source, so document accordingly.

Pension:  If you receive a pension from a retirement system like a government, union or corporate entity, you should receive an annual award letter too.  Some Organizations utilize the Work Number for verifications, so you might need to provide me with a code If this is the case.  If you don’t have the paperwork, the website of the entity it comes from is a good place to start.

Retirement Accounts:  If you draw money from a 401k, Roth IRA, traditional IRA, or another retirement account we need to see this documentation.  We must prove that the payments will continue for at least 3 years.  We will need the quarterly statement (or 2 months if you receive them monthly) and any pertinent documentation of set draws and balances.

Income from Trusts:  Instead of an “award letter” as given with other types of income or survivor benefits, trust recipients may ask for their trustee income letter from the governing body, and we may ask for trust legal documents as well, especially if there are other members to the trust.  Most trusts will have quarterly statements showing the amounts left in the trust and how it’s invested (and these documents are both assets AND income documents), we will need copies of this too, so we can document how long the trust income is likely to last.

Income from Investments:  Rental properties, dividends, ownership interest or any interest or income from producing assets can apply as income as well as an asset.  We don’t have to prove the 3 years continuation because you own the asset and we don’t have to calculate a percentage because it’s not variable like an IRA investment.  I will ask you about this asset both to show reserves, but also potentially as an income source.  These cases are more individualized, so let’s talk.

Annuities:  Annuities can also be tricky because it is dependent on how it was set up.  Some can vary or have an ending balance, and some will continue for your life (and some even have survivor-ship benefits too)  This is paperwork that I need to see so we can determine if it’s just an asset or can also be used as a source of income.  (Again, 3 yrs continuation is the benchmark we must prove.)

Self Employed Borrowers

I’m self employed. What about all those deductions I took on my taxes?”
says Every client who is also a business owner EVER.

Self-employment is a complex situation for a potential homeowner to be in.  Thankfully, I have some programs that may benefit you.  For self employed borrowers, the assets are as important as the income documents because if you are flush with assets, proving your income may not even apply.  Let’s talk.  In the meantime, gather:

2 years tax returns both personal AND business, along with all the schedules.

Any associated 10-99s (and w2s if your income has both)

YTD Profit and loss statement

Bring me your assets!  More on that coming up, but we want both personal and business accounts.  I’ll figure out your best option from either the regular income programs or an asset program. You’ve got options!

More Questions related to Income

I am on unemployment, will that qualify as income? 

Mostly, no.  Job gaps can be problematic too.  However, once you’ve had a job for 30 days, come talk to me about the situation and I’ll let you know if I can help. There is, however, an exception for seasonal workers.  You might still be eligible IF:

You’re a contract worker who works 6 months per year and earns at least $90k and unemployment the rest of the time and you have been at this job for at least 2 years.  If this is you, let’s talk.

You say you need 2 years of job history but I’ve been in school OR staying at home with the kids, OR taking care of a sick family member or…or…or

If you were in school before your current job, we just need to document that with a transcript.  Education counts equal to employment for HISTORY purposes!  Letters of explanation can cover most job gaps BUT if you can document a full 2 yrs or more BEFORE the absence, even better. 

I’ve had a few employers in the last few years, how will that affect me?

If you are a w2 employee, we just need the history it doesn’t matter how long you’ve stayed at each job, though this does vary by loan program.  You need to be on your current job for at LEAST 30 days and we need to document with a letter (and good reason) any job gaps.  Let’s discuss.

I only work part time, does that count?

Yes, IF you’ve been in that job for at least two years and the position is likely to continue (verified by employer.)

ON TAX RETURNS

What if you are behind on your taxes?  Or what if you aren’t REQUIRED to pay taxes because you are tax exempt?

If you don’t have to file, that will be documented by the IRS when we get your tax transcripts (this is done behind the scenes of every loan…yep, there are a lot of steps that we do that you’ll never even know about UNLESS there’s a problem.)

If you are behind or you haven’t filed taxes yet for the current year, this is what we need:

The most recently issued w2 (for last year)

Example: you haven’t filed taxes for 2022 or 2023, we would need your tax returns for 2021 and 2020, we would need your tax EXTENSION for 2022, but since 2023 isn’t due yet (as of the day I’m recording this) 2023 taxes aren’t required, BUT we do need that 2023 w2.  So: if you’re late we need to show you’ve filed an extension if it’s due, and we need the CURRENT w2 plus most recent two years of returns plus the w2s that match?

Clear as mud?  Don’t worry, we’ll give you an itemized list when we review your application.

So that covers income…kind of…remember how I have said, over and over, how customized the process is to each person…we haven’t even touched credit documentation or asset documentation yet.  Because of time, and because this part is usually covered on the second round of document requests, I’m going to give you the Cliff Notes version:

Credit:

If you’re divorced, receive child support, pay child support or have any kind of legal paperwork like a bankruptcy, foreclosure, etc…we need the paperwork.  Divorce decree or custody agreement, Bankruptcy discharge statement…you get the idea.

For any student loan debt:

If you have an IDR (income driven repayment) agreement, send us that

We will cover credit at a deeper level in a few weeks in this series…for now those are the most common documents we need, and again, it can be HIGHLY individualized so it’s hard to cover them all.

Asset Documents

Finally, let’s talk about ASSETS:

We covered many kinds of assets that also MAY count as income earlier…the same documentation applies.  If you have any loans on any of your assets, make sure the terms and repayment schedule also comes with the 2 statements or the quarterly statement you provide.

Any real estate you currently own:  we need any mortgage paperwork, insurance and property taxes and if you own several properties, a document from your accountant (usually prepared with your taxes) may suffice, along with any outstanding mortgage statement so we can update from there.  We need specific address and history for each property too.  We can get that in the interview unless you have it all written out with business documents.

And the MOST common asset that everyone has (or should have…if you don’t we need to talk)

Your bank statements:  checking and savings accounts specifically.  Any asset that is holding money that you will or might use for down payment and closing costs, we need to see those.  We need the two most recent months by closing.  I usually will ask for the most recent (and get the second one when it comes out…if you don’t have the house RIGHT NOW we’re going to need two fresh ones anyway.)

Remember that for many loan types we will need to be able to document most of your deposits, and underwriters will look for undisclosed or forgotten about liabilities in those statements as well.  Again, we’ll go into assets as it’s own subject later in the series…but for the documents that you need at the time of application.  Please make sure you bring, send or upload these for us.

We need all pages from each statement that you have (and from each borrower) even if pages say “intentionally left blank”, or they have an ad on them.  If it says 1 of 8 then I need all 8 pages.  If it says there are 12 pages and you send me 11 because there was an ad on page 10…the underwriter is going to ask where that page is, so please send them all.

You might be tired of hearing me say this, but your documents may vary, but we will have a list for you when we review your application, and please know that some documents, MAY give rise to asking for MORE documents.  We aren’t doing that to be a pain, but to make your submission BULLET-PROOF…and documenting EVERYTHING and having a solution ready for any potential hurdle is how we do that.  We do that with documents. 

If you like this content, please like and subscribe and please share with anyone who might benefit from this information.  Next week we get into “I’m prequalified Now What?”  What to do when you’re ready to start shopping for that house and the things you should know about that.  See you next week!!

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