When applying for a home loan there are many ways you can show income. The most common way is called full documentation, where you show the following forms of income:- Salary- Overtime- Bonus- Commissions- Part time job- Dividend and/or interest income- Rental income- Child support or alimony- Public assistance- Retirement income- Disability income – Military income and allowances

For salaried borrowers, you typically need your last 2 pay stubs, within the last 30 days of application, and your last 2 years W2s. Your required documentation may be less or more depending on your particular circumstances.

You can also show income using bank statements. Some lenders accept 6 months and 12 months of bank statements. The lender then calculates deposits made over that time period and comes up with your monthly income amount. One thing to note is most lenders use deposits only and filter out transfers from other bank accounts.

If you are able to document income this will allow you to get better terms from a lender. The less you are able to document, typically, the higher your rate will be.

In order to document child support as income you typically need to provide a copy of your divorce decree or order that states the amount that is provided, copies of 3-12 months cancelled checks that reflect a consistent pay history. The income must also be expected to continue for a period of at least 3 additional years from the date of closing.

For self-employed business owners attempting to go the stated income documentation route when applying for a mortgage, it is important to have your business license or other information which may substantiate the legitimacy of your business with you when you contact one of our mortgage professionals

There are also loan programs out their, that do not require any documentation at all.

Some lenders accept alternative documentations to prove income, such as a written Verification of Employment with wage information signed by the employer. For self-employed borrowers, most banks would accept the business tax returns, a year-to-date Profit and Loss Statement, and/or a Certified Public Accountant’s statement as proofs of the borrower’s income.

Non taxed items such as Social Security can be grossed up to 125%. For example if you received $300 in Social Security you can actually claim $375 on the application. This is standard with nearly all lenders.

If you are self employed it makes it more difficult for you to document your income due to most business write offs causing you to show less income on tax returns. If your credit scores are high enough then you may qualify for alternate forms of financing such as stated income or no ratio loans.

Here are some reason why you would choose a mortgage broker:

A mortgage broker can shop the banks for you; saving you time and money. A broker has many banks to choose from so you get the best rate!

Mortgage brokers work with wholesale rates rather than retail rates. They can often provide rates lower than what you may get quoted by a bank which uses retail rates.

Mortgage brokers originated over 70% of all mortgage loans originated over the past couple of years. For this reason alone, this should let you know how key the role of a good mortgage broker is.

A mortgage broker has the ability to have your loan approved and submitted at many different lenders. If a particular lender should cause a delay or refuse the loan the mortgage broker can have another lender begin to underwrite the loan. This will insure there are no timely or costly delays in your loan process!

A mortgage broker makes banks compete with one another for your business.

Mortgage brokers allow you to see multiple offers at once. You are given choices on which program best fits your needs. Direct lenders often have higher costs and are forced to charge you a minimum in points and fees. Brokers give you the flexibility to negotiate those fees.

A mortgage broker generally have established business relationships with multiple banks, and therefore has many more loan programs available, whereas a bank loan officer can only sell mortgage products offered by the bank. While a mortgage broker has the ability to shop different lending institutions to find loan programs tailored made for homebuyers in almost any financial situation, a bank based loan officer can only offer the bank’s product, even if that loan product may not be the best for the home buyer. For example, a neighborhood bank may have a “Stated Income” program for loan applicants with credit scores of 700 and above and a “No-Doc” program for credit scores of below 700 at a higher interest rate. Since a borrower with a credit score of 685 does not qualify for the “Stated-Income” program, the bank loan officer would put him in a “No-Doc” loan with a higher interest rate. On the other hand, an experienced mortgage broker can often find another lender offering a lower interest rate “Stated Income” program for the same borrower.

A mortgage broker can quickly determine the best loan program for you, then search through several lenders who specialize in that program to find the best rate and terms for you. A bank, on the other hand, has fewer programs to choose from and must sometimes try to fit your unique situation into one of their programs, whether it is a perfect fit or not.

In addition a good mortgage broker will look at more than just obtaining a loan for you. They will look at your whole financial picture to make sure the loan program fits your short term and long term goals.

A stated-income loan qualifies a borrower using the income the borrower states on the application form – as opposed to the income the borrower can document. With a stated income loan, the lender agrees not to attempt to verify the income the borrower has stated on the application.

Stated income mortgages are ideal for the self-employed and for home buyers in professions with salaries comprised mostly of cash tips, such as waiters and hotel porters. This type of loan applicants can often afford a mortgage, but don’t have the necessary pay stubs to document their true earnings. Self-employed business owners whose personal assets are commingled with the business assets often utilize “Stated-Income Stated-Assets” mortgage programs.

You are responsible for providing an accurate figure when the loan officer asks for your income amount. The loan officer should not coach you or fill in the amount for you. If the loan is audited and fraud is discovered you and or the loan officer can be held accountable under the law.

One of the reasons for a stated income loan is to minimize paperwork during the loan application process. A number of requirements that would normally be requested are W2 Statements, 1099 Forms, Bank Statements, and Pay Check Stubs. A stated income loan would not require the borrower(s) to find and organize this information to be approved for a loan. In many cases the interest rate difference is very minimal but normally slightly higher than a loan which requires proof of income.

On some stated income programs, the lender may require the borrowers to complete and sign Internal Revenue Service form 4506. This form gives the lender permission to access past and future tax returns of the borrowers. Having a signed and completed 4506 form in the file greatly enhances the marketability of the loan to the secondary market.

Some times this loan program has been referred to as “The Liars Loan”. It is important to understand, the existence of this loan, is for the purpose of helping borrowers, who otherwise cannot document their Actual Income. It is not designed to fictitiously inflate your income.

Stated income may be used in lieu of full documentation if you have higher credit scores. Lenders view you as less risky and therefore are willing to dismiss income documentation to speed up the loan process. The rate you receive is contingent on specific loan to value and/or down payment restrictions.

Lenders will often check with widely-available salary survey sources like salary.com to determine whether or not the income stated is consistent with the borrower’s profession and title.

Editors Note: Due to the mortgage and credit crunchy, zero down home loans are no longer available. If you’re in need Denver Home Mortgage, we can discuss your mortgage situation.]

Zero down mortgage financing is available to many people. It is very possible for a large number of consumers to qualify for a home purchase without putting any money down. This has become a very competitive market for lenders competing for this business and the number of homeowners who obtain loans with no money down is growing each year.

It is important to realize that while it may be the only way a borrower can purchase a home, a zero down mortgage does carry a higher interest rate. Ultimately the borrower’s goal should be to refinance when there is enough equity to achieve an 80% Loan to Value (LTV).

One option for high credit score borrowers who have minimal disposable cash is to use a 103% loan. This loan allows you to borrow up to 3% in addition to the purchase price to help with closing costs. Ask your preferred mortgage professional if you qualify for a 103 LTV program.

Some conforming zero down programs do require you to contribute at least $500 to the purchase. Your earnest money counts as money towards purchase. You may also be required to pay your hazard insurance out of closing so that will be another out of pocket cost. Ask your mortgage broker for details on the programs they offer.

The most common way mortgage brokers structure “Zero Down” financing is to break the loan amount into a first and a second mortgage, with the first mortgage consisting of 80% of the loan amount needed and the second mortgage being 20%.

Zero down mortgages are a great tool to use, even if you have saved up for a down payment. By choosing the zero down mortgage, your down payment money can now be used for closing costs associated with the loan, moving expenses, new furniture, or any other expenses that you may have when you move into your new home.

If you cannot afford a down payment for your home, there are many down payment assistance programs and grants that may be able to help you purchase your new home. Often these programs are limited to first time home buyers or those with low income. However, there are often no limitations. Call me at and I may be able to find a program that will work for you.

Obtaining a true zero down mortgage is when you will not have to come to closing with any funds of your own. In order to achieve this you will need to either have a no closing cost mortgage which can get expensive, or you can have the sellers pay closing costs. Traditional conforming lenders will generally let the sellers pay up to 3% of your closing costs, while most Alt A and subprime lenders will allow up to 6% in closing costs paid by the seller.

Often times zero down payment programs are available to first time homebuyers. If you need a stated income program you may be able to obtain a stated zero down program with an Alt A or subprime lender.

In 2005, 43% of first time home buyers used zero down programs. You may qualify for one of these programs. Call me now!