Determining whether your income is sufficient to get a home loan isn’t as simple as just looking at your pay stub.
Lenders will assess all your income sources and monthly debts to figure out what mortgage you can afford and have the likely ability to pay back. We’ve put together a list of sources, variables, and debts to help you determine if you may be eligible for a loan.
A mortgage lender will want to see current pay stubs as well as W-2 tax forms for the past two years. If you’ve recently had a change in pay, such as a raise, you’ll also need to get a statement from your workplace confirming that the change is permanent.
You may also be able to use special-case income, such as overtime and commissions, as part of the income calculation for your mortgage. To qualify these items, you’ll need to document that you’ve received them for at least two years and provide confirmation from your boss that they’re expected to continue.
If this income comes from a source outside of your primary employer — such as part-time work or side jobs that pay only commission — you’ll need W-2 forms for these as well.
Lenders will want to see records indicating that your income remains consistent from year-to-year. Minor fluctuations or decreases are typically acceptable — a lender is trying to determine your ability to pay back your mortgage.
Plan on providing tax returns that show your average earned income is enough to afford monthly mortgage costs. You will likely need these tax documents for at least the last two years.
The same documentation rules apply for soldiers and their families. One benefit for military service members is that housing, base, and food allowances may be included in income for mortgage calculations. Those deployed to war zones must provide documented confirmation, since income earned in these zones is not taxed.
Here are some examples of required documents:
Your lender may request additional information when processing your application. Be sure to check with them on their requirements before you apply, so you have time to collect and organize everything you need.
