5 Ways to Prove Your Income When Applying for a Mortgage
If you are unsure of whether you qualify for a mortgage or not, just because you are self-employed or derive your income from other sources, you may need to contact a mortgage expert who’ll help provide you with options.
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Homeownership remains to be one of the most important decisions a person can make. As you get older, owning a place that you can call (your own) home can provide you with a sense of stability and, of course, a long-term financial investment.
But then again, this dream might seem unrealistic, especially if you don’t have the funds to finance the purchase. Like most people out there, a home mortgage could be your best bet.
Home mortgages come with strings attached, alongside terms and conditions to be met before getting approved. And needless to mention, among these include proof of income.
Below are five ways to prove your income when applying for a mortgage.
1. Pay Stubs
If you are considering approaching a lender to finance your dream of owning a house, then don’t go too far. The general information included in pay stubs should be enough to convince mortgage providers of your source of income, and potentially your ability to pay them back.
This includes the employer’s business details, employee’s personal details, gross wages, tax cycle, hours worked, and net pay to mention but a few. If you happen to be an employer, then this Form Pros tool might help provide you with inspiration on where to start. It’s even easier to generate your own pay stubs if you are self-employed.
2. Pay Slips
Most if not all Pay As You Earn (PAYE) employees have a pay slip presented to them after every month. This is an important document as it is amongst the easiest ways mortgage lenders verify income. With most mortgage lenders, they require that you provide at least three months' proof of payment. This means three pay slips.
While both documents may contain similar details, the major difference between pay stubs and pay slips is the duration of pay. Moreover, pay stubs tend to contain more detailed information, whereas pay slips are often a summary of an employee’s monthly or annual earnings.
3. Bank Statements for The Self-Employed
To help mortgage lenders build a clear picture of your financial situation, primarily if you are self-employed and have a well-defined financial system, then it's very likely that you might be requested to provide them with your bank statements.
This will help them know how much you make from your business and whether you pay your taxes on time. Lenders can ask for anything from 6 to 12 months of your most recent bank statements.
4. Service Contracts
Earning your living as a contractor also puts you at a vantage point to securing yourself a mortgage. If you extensively conduct your research, you’ll come across mortgage lenders who’ll want to verify your contract form.
It should be a signed contract indicating the terms of the contract and most probably, how much you are making out of the contract. In a nutshell, some information that mortgage lenders might want to verify from your service contract include:
- Job nature
- Compensation and benefits
- Employee classification
- Contract period
- Privacy and employee responsibilities
5. Tax Return Statements
Finally, the information included in tax return statements can help provide lenders with an understanding of the amount you earn, as well as other deductions or charges that may affect your ability to make payments.
Nonetheless, it’s important to ensure that all documents sent over contain accurate and up-to-date figures, including any end-of-year adjustments due to changes in salary, for example. Additionally, including several years' worth of tax returns allows those issuing mortgages to better evaluate your income's consistency over the years listed.
To sum it up, there are more than just a few ways to show lenders that you have a consistent income, and that they can trust you with paying back their money on time. With the above options available to you, you will hopefully increase your chances of getting approved for an adequate amount to finance the purchase of your dream home.
If you are unsure of whether you qualify for a mortgage or not, just because you are self-employed or derive your income from other sources, you may need to contact a mortgage expert who’ll help provide you with options. There are also mortgage brokers who are well-versed in this topic and might be of great help to resolve your queries.
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