What Income docs do you need?

Income Type:

Social Security Awards letter (Current Year)

Prior 1099’s
To Determine if you can gross up (Follow Product guide-FHA/Conv. Etc)
and review 1040 Tax return Line 5.. 5A will show non taxed income and
5B will show taxable portion – you can only gross up non taxable
Pension Benefits Letter – Must show Minimum 3 year continuation – most will be lifetime -letter must state lifetime or other timeframe
2 years W2’s

Self Employed:

2 Years 1040’s with all schedules (These are your personal tax returns).
The tax returns will tell you what other documents are needed
1040 – Page 1 Line 7 will tell you if there is any W2 income.

Self employed
people also pay themselves w2 income often. You will need all w2’s that
when added up match the $ amount entered on line 7 of the 1040
Line 7A will tell you if there’s other income. The income details will be
farther indicated on Schedule 1

Schedule 1 Line 2A show alimony received
Line 3 indicates if there is a Schedule C (Sole Proprietors or single person
LLC’s)
Line 5 is for Schedule E which is either Business (LLC/SCorp/Corp) or
Rental income- It could be both if borrower owns rental property and
businesses.

Schedule E The totals on all schedule E’s should add up to match the $ on Schedule
1. If the total on one of the schedules doesn’t match you know there are
others
On Schedule E Part II Box 28 you will see business name. If the business
name is duplicated on multiple lines it’s because both parties on the tax
filing have ownership in the business.

Check to confirm the Tax ID (FEIN)
is the same on both lines. If it’s different it indicated multiple companies.
Box 28B will have a P or S

P = LLC (Partnership) which is filed on a 1065 partnership return of if
owned by one person can be filed on a Schedule C in the personal 1040
Tax return. If the return is Filed on 1065 there will be a K1 which will
show the % of ownership. If they own 25% or more you will need the 2
years returns. (Assuming not single person partnership filed on 1040

Schedule C – There is no K1 on the Schedule C) if they advise that they
own less than 25% on a 1065 you’ll just need the K1 from the 1065 to
support that. If there are multiple partners there must be a 1065 filing

S = SCorp or Corporation which is filed on an 1120S for the S Corp or an
1120 for a Corporation. On the 1120S you will have a Schedule K1 which
will show the % of ownership. If they own 25% or more you will need 2
year full returns. If they advise that they own <25% the K1 will show their
shares. The 1120 will not have K1’s, the income just flows thru to the
personal returns. We don’t see 1120’s often

Docs Needed:

LLC with 25% or more ownership you need:
2 year 1065’s with all schedules
Year to date Profit and Loss statement and balance sheet –signed and dated
3 months bank statements from the business (3 because of covid-normally 2)
If they own <25% then you only need the K1s for 2 years
(If LLC is owned by one person A/K/A single person partnership they can file income on

Schedule C on personal 1040 Return – P & L / Balance sheet and Bank statements still required

SCorp/Corp with 25% plus ownership you need:
2 year 1120’s/1120 with all schedules
Year to date Profit and Loss statement and balance sheet –signed and dated
3 months bank statements from the business (3 because of covid-normally 2)
If they own <25% you only need the K1’s for 2 years
1040 Schedule C – Sole Proprietor or Single Person LLC you still need;
2 year 1040s with all schedules
Year to date Profit and Loss statement and balance sheet –signed and dated
3 months bank statements from the business (3 because of covid-normally 2)

Wage Earner

2 years w2’s for all jobs
Paystubs for the most recent 30 days
(All w2’s should balance with line 7 on 1040)
VOE’s – Primary job full income breakdown
Former jobs – Dates of employment only needed unless you are trying to  support an income trend then you need full breakdowns

Trust Income

Copy of Trust – must be irrevocable

Child support/Alimony

Marital settlement agreement and final dissolution of marriage
Proof income received (For timeline follow program specific guideline)
If never married and receiving child support request court order and proof received

Voluntary child support/alimony – review program specific guides

All Social security/Disability, Pension, Child Support, Alimony, Trust income must be guaranteed to continue for a minimum of 3 years from closing.

Social Security/Disability/Child Support

may be able to be grossed up if not taxed. For social security review 1040 Line 5 – 5A & 5b will
confirm taxable/non taxable then follow program rules

Dividends/interest/capital gains. Only use if completely necessary – capital gains are not typically allowed as usually they are 1 time events. 

Military Income

Paystubs aka LES (Leave earnings Statement
DD214
Current orders if active

Documents Needed For All Loan Applications

 

 

ALL BORROWERS:

1. Copies of W-2’s for the last two years;
2. Copies of paycheck stubs for the last 30 days (most current);
3. Copies of checking and saving account statements for last three months (all pages);
4. Copies of quarterly or semi-annual statements for checking, savings, IRA’s, CD’s, money market fund, stock, 401k, profit sharing, etc.;
5. Copy of sales contract when ratified;
6. Employment history for the last two years (address any gaps of employment);
7. Residency history over the last two years, with name, phone number, address and account number of Land or Mortgage Company. Rental property copies of leases plus mortgage information.
8. Canceled earnest money check when it clears or corresponding bank statement, if applicable;
9. Commissioned or bonus income — if 25% or more of base, must have tax returns;
10. Check for the expense of appraisal & credit report;
11. Refinance Copy of Note, Deed of Trust, Settlement Statement, Survey, and Insurance information;
12. Any assets used for down payment, closing cost, and cash reserves must be documented by a paper trail;
13. If paid off mortgage in the last 2 years, need copies of HUD1;
14. Copy of drivers license for applicant and co-applicant.

SELF-EMPLOYED BORROWERS:

1. Copies of most recent 2 years tax returns (with all schedules including k-I’s if applicable);
2. Copy of current profit & loss statement and balance sheet;
3. Copy of corporate/partnership tax returns for most recent 2 year period if owning 25% or more of company — copies of W-2’s and/or 1099 forms.

DOCUMENTS WHICH MAY BE REQUIRED:

1. Relocation Agreement if move is financed by employer, i.e. buyout agreement plus documentation outlining company paid closing costs benefits;
2. Previous bankruptcy, need copies of petition for bankruptcy and discharge, including supporting schedules;
3. Divorce Decree if applicable;
4. Documentation supporting moneys received from social security/retirement trust income, i.e. copies of direct deposit bank statements, awards letter, evidence income will continue.

DOCUMENTS NEEDED FOR FHA/VA LOANS:

1. FHA: Copy of social security card and drivers license for each applicant and co-applicants;
2. VA: Original Certificate of Eligibility and copy of DD214 Discharge Paper;
3. VA: Name and address of nearest living relative

 

 

 

Joel Lobb
Senior Loan Officer
NMLS#57916

text or call my phone: (502) 905-3708

email me at 

kentuckyloan@gmail.com

 

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org).

All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice. Manufactured and mobile homes are not eligible as collateral.