What documents are typically required to provide proof of income when applying for a loan or mortgage?

What documents are typically required to provide proof of income when applying for a loan or mortgage?

When applying for a loan or mortgage, you usually require pay stubs, federal tax returns, a profit and loss statement, bank statements, an employer letter, and other necessary documents.

When applying for a loan or mortgage, you’ll need various documents like pay stubs, tax returns, a profit and loss statement, bank statements, and a letter from your employer.

That depends on your employment type.

For Salaried or W-2 Employees

If you’re a salaried employee, lenders typically ask for your most recent pay stubs covering the past 30 days, along with W-2 forms from the last two years to verify your income. They may also request your recent bank statements to confirm deposit consistency and overall financial health. In some cases, a lender might directly contact your employer for a Verification of Employment (VOE) to confirm your job status and salary.

For Self-Employed Individuals

Self-employed borrowers need to provide more detailed financial documentation. This usually includes two years of personal and business tax returns, along with profit and loss statements to demonstrate income consistency. Lenders may also request several months of both personal and business bank statements to evaluate cash flow. If applicable, 1099 forms can further support your income claims.

For Retirees or Those with Fixed Income

Retirees often rely on fixed-income sources, so lenders look for Social Security Benefit Statements (SSA-1099), pension distribution statements, or documentation of withdrawals from retirement accounts such as a 401(k) or IRA. Bank statements showing consistent deposits from these sources can also serve as proof of income.

For Individuals with Rental or Investment Income

For those earning income through rentals or investments, lenders require documentation such as current lease agreements to verify rental income. Tax returns from the past two years are essential to confirm income trends, and bank statements showing consistent deposits can strengthen your application.

For Commissioned or Bonus-Based Employees

If your income is largely commission-based or includes bonuses, lenders will review records of commissions or bonuses paid by your employer, often through detailed year-end statements. They’ll also need your tax returns for the last two years to gauge income stability, supported by bank statements reflecting regular deposits.