How can I prove my income? - While it’s true that most people know how much mortgage they can afford based on their monthly budget, there are times where the manner in how the income is generated may make it difficult to qualify for a loan.

An experienced loan consultant will be able to help you get the most out of your income, whether it be overtime, bonus, tips, or commissions. The best way to do this is by demonstrating a history of consistent earnings over the last two years.

Many self employed borrowers run into the problem of difficulty proving income. There are many different programs available for borrowers with difficult to prove income. There are stated loan programs where the income is not verified, there is also programs that use bank statements as a source to prove income. All have there drawbacks but your mortgage broker should explain to you the best mortgage loan program for your situation.

Consumers can have a hard time documenting or using income that is from commissions, bonuses or overtime sometimes. If you are considering switching jobs from salary or hourly to a commission position you may want to hold off until you obtain your mortgage loan. Without a recent history of being in a commission job a lender will usually not permit the commission income to be used for qualifying purposes on a mortgage. The same goes for bonuses and OT. You need to be able to show a history of receiving this type of income for it to be included for qualifying purposes. Consult with a mortgage broker if you have questions about your income situation and what would be best for you to do.

Self employed mortgage loans - If you are self employed you are probably aware of the different financing rules that apply for self employed borrowers.

You will probably need a letter from your CPA to verify that you are self-employed. Your CPA is the only person who can verify that you own your own business.

Many lenders ask for a business license that's active and has been active for at least two years. This is proof of self employment for many lenders. In cases where the business does not require a license, the CPA letter may be used.

Because of the trouble documenting income for many self-employed borrowers, a stated income, no doc., no ratio, or bank statement program is used many times for income documentation for a self-employed borrower. Many self-employed borrowers actually make a good amount of money, and enough money to qualify them for the loan, however instead of going through the headaches of trying to document their income with tax returns for the last two years, a current balance sheet, a current profit and loss statement signed and verified by their CPA, and a CPA letter to show proof of being self-employed for the last two years many borrowers will just opt for a reduced documentation loan. Sometimes if your credit score is high enough you are still able to qualify for the best rates and you don't have to take a rate bump for the reduced documentation.

In some cases, bank statements may be used as documentation of self-employment income. Check with your mortgage professional.

If you have a very high credit score or a large down payment your mortgage professional may be able to waive the income documentation requirement entirely. You may need credit scores of 720+ or a 25% down payment. Be sure to ask you preferred mortgage professional if you qualify for a income documentation waiver.

If you are newly self employed and have been in the same line of work for 2 years, most lenders will use your previous employment record to satisfy the 2 year self employment history requirements.

In some cases, in lieu of a letter from the Certified Public Accountant, banks accept Articles of Incorporation and professional licenses as proof of self-employment.

In addition to the CPA letter, the following may be used to supplement the verification of self-employment:
Business License, Letter from Bank, Yellow Page Ad, Paid County Business Fees, Secretary of State Web Site, Self employment Insurance Coverage, Customer Reference Letters, or Form 4506T (Request for Transcript of Tax Return)

Lenders require different information from self-employed borrowers before they will provide a mortgage loan. Normally buyers are required to show salary information to establish continuity of money earned to reassure lenders that the mortgage loan will be repaid.

Many self-employed consumers opt for a bank statement program to obtain a mortgage loan. A bank statement program is one in which the lender will use a certain number of months worth of bank statements, add up the total deposits and then divide by the certain number of months. This will provide the lender will a dollar amount for average monthly income. Usually a lender will require either 6,12, or 24 months worth of bank statements on this type of program.

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