What is Verification of Income and Assets?
When you apply for a mortgage, your lender will request a vast amount of paperwork from you. This will include looking at your income, assets and existing debt, and your credit-worthiness. While it might seem a bit overwhelming to provide all this documentation, it benefits you in long run so you won’t end up with a monthly mortgage payment that you can’t afford.
What Is a Verification of Income?
When a loan officers asks for a verification of your income, they’re confirming if you have the funds to pay your monthly mortgage payment. You shouldn’t borrow more than you have the means to pay back, and your monthly mortgage payments are no exception.
Mortgage Verification Requirements
In order to confirm your income, a mortgage lender will ask for a few documents:
- Two years of W-2s
- Two years of tax returns (federal and income)
- Two most recent pay stubs
In addition, you should have written history of your most recent checking account statements, current savings account statements, monthly debt obligations, statements from any other loans you may have such as personal, student, auto, and your most recent credit card statements.
How Does Your Lender Verify Your Income for a Mortgage?
Your lender might also contact your employer to confirm your employment. This lets the lender verify that the information on your W-2s and paystubs is recent and accurate.
What Is Verification of Assets?
Just like mortgage lenders will want to verify that you have the means to make your monthly mortgage payments, they’ll also want to ensure that you’ll be able to pay the principal, interest, taxes and insurance in case of a financial emergency.
This is determined by your assets, or items you own that have value, like savings accounts, checking accounts, stocks, etc. When these assets have a cash value, or are easily converted into cash, they’re known as “liquid assets.”
Lenders want to confirm that enough of your assets are liquid in case of a financial emergency that leaves you unable to keep up with your mortgage payments. When life throws you curveballs that cost you access to your income (loss of a job, medical emergency, etc.) your liquid assets are there to help you pay your bills.
What Is an Asset Document?
Examples of documents you might have to submit to verify your liquid assets include:
- Checking accounts
- Saving accounts
- Certificates of Deposit (CDs)
- Stocks
- Mutual funds
- Bonds
- IRA/ 401(k) or other retirement plans
Most lenders suggest to have six months’ worth of liquid assets in order to plan for an unforeseen financial issue. This ensures that you have a way to continue your mortgage payments, should something happen to your main source of income.
You can also submit proof of non-liquid assets, or assets that are harder to convert to cash like property, cars, self-owned businesses and any other item of material value like artwork or jewelry. However, these assets might be harder to liquidate in an emergency, since they may take time to convert into cash.
After reading about all the documents you must provide, it may seem overwhelming. At First Ohio Home Finance, we are here to help every step of the way. Contact us today to get started!
