For this last part of the series, we will be talking about additional requested documents that will be requested for submission. Depending on the loan program, the underwriter will need information to verify household income. Also, for first time home buyers whom own their own businesses, there will also need to be additional documentation needed to show the underwriter exactly how much income is being brought in by these businesses. We will be going over those documents.
Additional Household Documentation
For the first time home buyer applying for a USDA home loan, the underwriter will need to know exactly how much income everyone in the household is making. This can be done in several ways. The underwriter will request tax returns, Employer W-2 Forms, pay stubs and verification of employment. These items all contain information about income, either immediate income or annual income. Pay stubs have year-to-date information, which can give the underwriter an idea as to how much the first time home buyer and household members earning an income have made throughout this year. This form is also cross-referenced with the verification of employment, which is filled out by the employer. As mentioned in a previous article of this series, the first time home buyer can save time with these loans by providing the most recent 30 days of pay stubs, as well as sending in pay stubs as they are made available while the loan process continues. The underwriter will be looking for any changes in income, whether it is a fluctuation in hours or additional deductions, among other criteria previously mentioned. The first time home buyer need to make sure they send in all pay stubs for all persons in the home that is receiving a pay check. If a spouse, or a household member over the age of 18 does not have any income, that member is responsible for sending what is called a No Income Letter, that is signed and dated in pen, letting the underwriter know.
Self Employed First Time Home Buyer Documentation
For borrowers who own their own businesses, pay stubs may not be something that is acquired as well as business bank accounts. The underwriter requires the business accounts to help show the income of a first time home buyer who is self-employed. All pages of the tax returns must also reflect that the first time home buyer has Schedule C, or self-employed income. This is usually illustrated by a positive or a negative value, as well as additional pages on the tax return itself. The first time home buyer can make sure that they get all of their tax return documentation together, including all pages and schedules to save some time sourcing their self-employment income. Since the self-employed first time home buyer may not be receiving pay stubs, the underwriter will require both a Profit and Loss statement, as well as a Balance sheet. These items can be prepared beforehand, and submitted as soon as possible to get the ball rolling on these loans.
With these added tips, we will be going into more detail on the Profit And Loss Statements, as well as Balance Sheets for the next blog update!