Your mortgage application is the first piece of information lenders use to qualify you and so mortgage application accuracy is critical to your overall loan. The money you make will be one of the main components lenders use in figuring out whether or not you qualify for a mortgage. Never omit, hide or manipulate mortgage application information because doing so will likely put your mortgage application in jeopardy with your lender.
If you apply for a mortgage, lenders require particular earnings documentation to fund a mortgage, together with:
- Tax returns for the 2 most current years, with accompanying W-2s
- Company tax returns for the 2 most current years if self-employed
- 30-days worth of pay stubs
One exception to this rule is when applying for a government loan streamline refinance or a HARP 2 refinance. For these, your lender may not require you to submit income documentation.
However there are some circumstances where you might think about omitting your revenue from your application. Going down this road will land you in a sticky situation when trying to get a mortgage. To get more information on what all is needed during the mortgage process, check out our article Home Purchase Mortgage Checklist to learn more.
Mortgage Application Accuracy Importance
The Self-Employed Borrower
There isn’t a way to get around the lending requirement to present two years of tax returns — together with company returns when relevant. Right now, federal lending necessities forestall a lender from choosing which revenue years to make use of for qualifying. For instance, if your 2013 revenue was stable but your 2012 revenue was not, the lender can not merely ignore the 2012 revenue, as they have to calculate a 24-month average of your revenue. The decrease in revenue will, in fact, decrease your mean income.
Moreover, if you’re a worker of your individual firm, you are still thought of self-employed. Why? You set your individual earnings, not like a conventional worker who doesn’t have ownership in the firm. In this situation, you still nonetheless must submit all of the required documentation.
The primary query a lender would ask is: Why are you attempting to cover your earnings? This is where mortgage application accuracy comes in. More often than not when the scenario arises, it’s a result of when showing full earnings will make the lending situation worse in making an attempt to qualify. For instance, in the event you’re receiving revenue you do not disclose in your tax returns and you do not pay taxes on them, you may now have larger issues (because the IRS is especially looking out for tax fraud). Merely put, it is best to offer your lender all the information concerning your earnings. Doing so permits them to assist you to get a mortgage and assess your qualifications in an accurate view.
Moonlighting & Cash Deposits
If you’re placing cash deposits regularly into your checking account and you do not show it on the application, you could possibly throw a giant wrench in your mortgage. That is true whether or not it is job revenue or not. In the event you’re applying for a government loan then all cash income must be documented, proved and sourced.
There’s a particular consideration with USDA loans. In contrast to a conventional or a FHA mortgage in which you’ll be able to choose which applicants are included on the mortgage application, the USDA critiques complete family earnings. For instance, if one borrower generates $70,000 in annual revenue, and the partner not on the mortgage generates an additional $40,000, the overall family revenue is $110,000, which exceeds the USDA’s earnings threshold (which varies by county). This implies the lender should include the $40,000, whether or not that individual is applying or not.
Finally, lenders are in business to lend money and so they will want to lend the money to borrowers who can pay the proposed mortgage amount. If you’re interested in how much you can qualify for, use our Mortgage Calculator.
Be straight with your lender and do not hide information so your lender can qualify you accurately. Once approved your one-step closer to becoming a homeowner!