Income Paperwork for Mobile Home Loan Approval
Arguably one of the most frustrating parts of buying a home is All. The. Paperwork.
I remember when we were buying our mobile home with an FHA loan my husband was stopping by the bank every other day. We were digging out old files, requesting tax transcripts, scouring the house for paystubs, and writing letters for deposits made not pertaining to our day job pay.
All of these documents, I later discovered, are what the bank calls “conditions”. Each item they request is part of the process of verifying the income reported in your pre-qualification packet. See, you may receive a pre-approval based on the initial information supplied to the bank, but as the loan progresses, they begin to verify all those numbers to ensure there was no misinformation.
And, while you may have reported income, employment, and expenses to the best of your knowledge, there are certain variations of those that lenders cannot accept. So I want to break it down the best I can and give you an idea of what you’ll need as you navigate the approval process to buy your mobile home.
There are a couple of things your bank will require in order to verify your income and it would be best to have these ready to submit with your pre-approval paperwork because they will ask for it anyway—last two W-2’s received for tax purposes and the last two paystubs from your employer.
These two items are the start of verifying the income you report on your pre-approval application. Here’s the thing though, while many people do have income that is straight forward and quickly verified, many people do not.
Social Security and Disability
If you report income from social security or disability, the bank will need to verify these with your award letter and typically a history of bank statements. The same would be true for pensions or any other monthly, recurring income guaranteed for potentially the duration of the loan.
If you are reporting child-support payments as part of your monthly income, the bank will also need to verify an established history of receiving these payments as well as the court directive they originated from. Unfortunately, though child support requirements are established, it does not mean they are consistently paid, and a bank will not be able to include that income as reliable if there is not a strong pattern of them.
Independent Contractor or Self-Employed
If you work for yourself, or are employed but are paid as an independent contractor, loans get a little more complicated.
First, because taxes are not removed automatically, banks can view this as risk of a buyer getting into hot water with the IRS should they become forgetful or irresponsible come tax season. And, second, because presumably your salary with a regular employer can only go up, while your self-employed income can fluctuate based on market conditions and self-motivation, this, too, is considered risky for a bank.
So, while with standard employment as long as you have been employed (not necessarily in one place) consistently for two years with the W-2’s and paystubs to prove it, independent contracting income will need to be proven with two years of tax returns in the same line of work. Meaning the bank will only consider reported taxable income and you can’t have been a roofer one year and an accountant the next.
The process of verifying employment is wrapped up in that of verifying income, with paystubs and W-2’s and tax returns. But banks will also often request what is called a VoE or Verification of Employment. This is simply a form filled out by your employer stating that you are indeed still employed with the company you reported on your pre-approval application.
It doesn’t happen very often but sometimes a buyer may lose their job between the pre-approval and loan closing date, this will most certainly throw the loan out of whack, so it is important to apply for your loan during a stable and reliable stint of employment. Both for your own security and the lender’s.
Expenses & Budgeting
The other side to conditions is where the bank decides if, with the income they can officially consider as reliable and consistent, you can “budget” for the loan payments required.
So, while you may have $3,500 coming in every month from your contracting work plus your regular job, without the established two year history from tax returns, the bank may have to disregard $1,000 of that income. The same may be true in terms of over-time income, bonuses, and commissions.
With their consideration of expenses and budgeting the bank will also look at your other monthly expenses such as credit cards, student loans, car payments, as well as insurance.
With this information, however, it is very important to apply to the bank without changing a thing. You never know what they will ask for, accept or decline, or comment on. Trying to pay off a debt, switch jobs, or even build your credit could actually negatively impact your evaluation from the lender.
Submit with what you have, as you have it, and then go from there. This will save you from doing unnecessary work, suffering a frustrating setback, or even losing out on your home altogether.
If you decide you want to submit an application to the bank, there are just a few things you’ll need to get started, two of which I mentioned earlier.
- 2 years of W-2’s
- 2 most recent paystubs
- A social security card
- A state-issued I.D.
The team at Braustin can help fill this application out and get it sent over to be reviewed by potential lenders with the estimated loan amount, requested amount of down payment and loan term. This application will and should ALWAYS be completely free of charge without need for a deposit or prior examination of your credit score.
Like I mentioned earlier, it’s best to let the bank tell you what will and won’t work to avoid jeopardizing your opportunity to become a homeowner, not you or even your mobile home retailer.