Document Your Income

Documentation

Documentation, documentation, documentation!  The three most important words during the underwriting process of your new mortgage.  The days of only “stating” or not providing your income documents are done.  Underwriters want to see your pay stubs and W-2s, even for your part-time job.  A two year employment history is needed to use your income.  Your two year employment history should be documented with pay stubs, W-2s, tax returns, verification of employment, and/or third party verification of your tax returns.  Part-time jobs usually require a one year history.  What if you get paid in cash?

Cash payments are usually documented with an IRS Form 1099 at the end of the year.  The general underwriting guidelines consider 1099 payments as self-employment income.  In which case, a two year history is required and the underwriter will scrutinize your tax returns.  We will discuss this topic on a later date in more detail.

The key to having a smooth process while financing your house is preparation.  Documenting your income is part of that process.  Imagine preparing for your retirement one month before you retire.  Preparing for the largest purchase of your life should not take place the month prior.  On the other hand, keeping good documention is good practice in keeping your financial affairs in order.

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