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What Income Do You Receive?
Employment Income |
Retirement Income |
Support Payments |
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Rental Income |
Investment Income |
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Employment Income
From a lending standpoint, you will be slotted into one of the two main types of income: Salary/Hourly Income or Self- Employed/Freelance Income. You can usually determine which category you fall into based on the tax returns that you receive. If you fill out a W2, you are a salary/hourly employed. Self Employed borrowers will fill out a 1099 tax return. There are different requirements for loan documentation based on each income type. For example, self-employed borrowers may be asked to provide tax returns for their business because the underwriters will ask to prove the company is profitable and is expected to remain profitable over the course of the loan.
Salary Vs Self Employed
Salary / Hourly |
Self-Employed / Contractor |
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Salary and Hourly Employees are the most common employment type. If you receive a W2 Tax Return, you most likely fall into this income category. In order to qualify, you must show that you have enough work history under your belt (Usually 2 years) and that you are expected to continue your employment for the future.
Document Requirements
Base Pay (Salary/Hourly) - Two most recent paystubs, Two most recent years of tax returns |
If you own your own business or you are a contractor, you will have different income qualifications than the standard salary/hourly borrowers. Not only must your income be sufficient, but you must also prove that your business is expected to provide sufficient income in the future. Your lender must feel comfortable with the stability of your business in order to qulaify for a mortgage.
Documents Requirements
Self Employed/Contractor - Two most recent years of personal tax returns, Two most recent years business federal income tax returns, Profit and Loss Statement, Business Bank Statements |
What Assets Do You Have?
Assets refer to items that you own that have a monetary value. In the mortgage world, these are typically slated into one of three categories: Cash, Cash Equivalents, and Property. Your Income and Salary information is required on a mortgage application, but it does not count towards your assets. A mortgage professional will look at all of your assets to determine if you are able to pay for your down payment and closing costs when obtaining a mortgage. In some cases, you may be required to show a few months of reserves (money left over from the transaction) in order to qualify.
Cash and Cash Equivalents
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Physical Assets
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Liquid Assets
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Other Assets
- 401k's and Pensions
- IRAs, Bonds, and Stocks
- Fixed Assets such as Furniture, Some Real Estate, and Antiques
- Equity Accounts such as Retirement Funds and Mutual Funds
- Government Bonds and Some Securities
What Assets Are Most Important To Lenders?
Your Mortgage Professional will take all of your assets into account when you are applying for a mortgage. Your cash, cash equivalents, and your liquid assets are going to carry more weight because they are easily accessible. Think about how long it can take to convert your stock portfolio into cash. This is a much longer process than pulling more money out of your savings account. While all asset types can help you qualify and pay for your mortgage, only a few as readily accessible as your cash and other liquid assets.
How Much Are My Assets Worth?
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Some of the assets at your disposal have a clear value. You can take a look at your bank account and you know how much money you have available. The best way to know the value of your Physical Assets (cars, homes, or antiques) is to have an appraiser review the items and assign them a value.
Once you know the value of your Physical Assets, you can feel comfortable including them on your mortgage application. Without an appraised value, these items can be very hard to include in your application. |
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