Lenders must make a reasonable, good-faith determination that you can repay a mortgage. To do that they verify your income with documents, and the paperwork they ask for depends on how you are paid. Knowing what to expect lets you gather everything before you apply, which can shorten the time from application to approval.
If you are a salaried or hourly employee
W-2 forms
Your W-2 (Wage and Tax Statement) summarizes what your employer paid you during a calendar year. Lenders commonly ask for W-2s covering the most recent two years to see a history of earnings. If you changed jobs, provide W-2s from each employer. Your employer must furnish W-2s each January; you can also request copies through your payroll portal or, for past years, a wage and income transcript from the IRS.
Recent pay stubs
Pay stubs show your current pay rate and year-to-date earnings. Lenders usually want the most recent stubs covering about a month. Make sure they show your name, the employer's name, the pay period and year-to-date totals.
Verification of employment
Most lenders confirm your job directly with your employer, either by phone, through a written verification or through an electronic employment-verification service. Many also re-check employment shortly before closing, so tell your lender right away if your job is about to change.
If part of your pay varies
Overtime, bonuses and commissions can often be counted, but lenders typically look for a track record and a reasonable expectation that the income will continue. Expect to provide pay stubs that break out each type of pay, past W-2s, and sometimes a written verification from your employer describing how the income is earned. Income that is new, irregular or declining may be counted differently or not at all.
If you are self-employed
Self-employed borrowers usually provide complete personal federal tax returns, with all schedules, for recent years, and business returns if they own a partnership or corporation. Lenders look at the income after business expenses, not gross sales. A year-to-date profit-and-loss statement and business bank statements may also be requested. Because deductions lower the income a lender can use, talk with your tax professional and a lender well ahead of time if you plan to buy.
Other income lenders may consider
- Retirement, pension and Social Security income: award letters and bank statements showing receipt.
- Rental income: leases and tax returns showing the rental activity.
- Child support or alimony you receive: court orders and proof of consistent payment, if you choose to have it considered.
- Military income: Leave and Earnings Statements.
Tax transcripts
Many lenders ask you to sign IRS Form 4506-C, which lets them request a transcript of your tax return information directly from the IRS. The transcript is used to confirm that the returns and W-2s you provided match what was filed. If you have not filed a recent return yet or amended one, let your lender know.
A checklist to start with
- W-2s for recent years from every employer
- Pay stubs covering roughly the last month
- Complete federal tax returns if you are self-employed, earn commissions, own rental property or have other non-wage income
- Employer contact details for verification
- Award letters or other proof for non-employment income
- Recent bank statements, which lenders also use to verify your down payment and reserves
Key takeaways
- Lenders verify income with W-2s, pay stubs, tax returns and direct employment checks.
- Variable and self-employment income usually need a longer documented history.
- Expect to sign a form allowing the lender to request IRS transcripts.
- Gathering complete documents early helps avoid delays before closing.