Asset & Income Verification

Complete Checklist of Documentation Investors Need for Approval

Many real estate investors will use a mortgage loan to pay for a large portion of an investment property’s sales price. While you may be familiar with the loan documentation that is required when you apply for an owner-occupied home, the documentation requirements vary when you apply for an investor loan. By learning more about the documents that your lender may require for your upcoming loan request, you can take steps now to prepare for your investor loan application.

Investors Asset & Income VerificationSome investors are turned off or even stressed out by the amount of documentation a lender requires. However, each document serves a very specific purpose and is essential for the underwriter to make an accurate, informed decision about your loan approval status. By providing all of the documentation requested quickly, you can promote the rapid processing and approval of your loan application. These are some of the more common types of documentation required by a lender.

Proof of Income

Just as the underwriter will review your personal income and overall debt-to-income ratio when you apply for a personal residence loan, the underwriter will walk through these same steps when you apply for an investment property loan.
  • Paystubs for Salaried Employees: Typically, the lender requires either a month’s worth of paystubs or the last two most recent paystubs to confirm your income level. A verification of employment may also be completed with you employer.
  • Federal Tax Returns With W-2s: You may need to provide your last two years of tax returns, including your W-2s if you are a wage earner. If you own a business, your business tax returns for the last two years may also be required. Contract workers may need to provide their 1099 forms for the last two years.
  • Other Related Income Documentation: All sources of regular income must be documented, so you may need to provide documentation showing your child support payments, alimony payments, rental income from investment properties, Social Security awards letter, pension documentation and more. Rental income from investment properties is most commonly verified by providing full copies of all of the leases on your existing investment properties.

Verification of Assets

It is likewise important that you document all of your assets. While you definitely need to document enough funds to pay the down payment and closing costs, the underwriter also wants to know how much additional liquidity you have available. This can be essential for your loan approval process if other factors indicate higher risk.
  • Financial Statements for All Accounts: For each bank account you own, the lender needs to see the last two to three months of bank statements. All pages of the statements should be provided. This includes checking and savings accounts, retirement accounts, stock or investment accounts and more.
  • Explanation and Documentation for Large Deposits: The lender will review your bank statements thoroughly. Any large deposits made into your account that are not generated by your regular income sources will need to be properly explained and documented.
  • Profit and Loss Statement for Self-Employed Applicants: If you own your own business, you will need to provide a current profit and loss statement, which details the business’s net worth. This is required even if your primary source of income is not generated by the business.
  • Business License: Some lenders may ask to see a copy of your active business license.
  • Life Insurance Documentation: If you have a cash value life insurance policy and indicated so on your loan application, some lenders may require you to provide proof of the current cash value amount of your policy. This is because the cash value amount is a true asset.

Other Documentation That May Be Required

The majority of the documentation that you need to provide to your lender for an investment loan application falls into the category of proof of income or proof of assets. However, other miscellaneous documentation may also be required by the lender:
  • Proof of Identity: You typically need to provide a copy of your government-issued photo ID as well as a copy of your Social Security card.
  • Proof of Insurance: Before closing, you will need to shop around and find coverage for the property. A full copy of the policy will be required, and the premium amount will be analyzed by the underwriter.
  • Divorce Decree: Commonly, if you have filed for divorce in the past, the lender need to review the divorce decree. This is regardless of how long it has been since the divorce occurred.
  • Property Ownership Documentation: Everything from a recent mortgage statement to the deed may be required for all properties you own. While this is not always required, you should be prepared to provide it upon request.
  • Credit Explanations: The lender will review your credit report and will ask for written explanations on all credit inquiries as well as all late payments or other derogatory items. Keep in mind that all late payments or outstanding judgments need to be paid in full before closing in most cases.
  • VA Certificate: If you are a veteran or an active military professional, you may be required to provide a copy of your DD214 form.
  • Sales Contract: When you are buying a property, the lender needs to review your fully executed sales contract. Proof of deposit for the earnest money may also be required.

As you can see, you may need to provide a lender with hundreds of pages worth of documentation when you apply for an investment property loan. It can take time to pull together all of the required documentation and send it to your loan processor. If you want to avoid delays with this process, it is wise to begin gathering together the required documentation now. You may ask your loan processor for a list of specific items that may be required for your unique loan application.

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