Mortgage shoppers often find the mortgage application and qualifying process confusing and intimidating; luckily, Mortgage Marvel is here to help. Mortgage Marvel has detailed FAQs that will help educate consumers on topics like lender's treatment of dividend or pension income, special requirement for self-employed applicants, and gifts used as a down payment. Once armed with additional knowledge, savvy consumers will be better positioned to make their mortgage financing decision.
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Frequently Asked Questions About Qualifying and Applying for a Loan

I have income from dividends and/or interest. What documents will I need to provide?

Generally, two years’ personal tax returns are required to verify the amount of dividend and/or interest income so that an average of the amounts received can be calculated. In some cases, lenders will verify ownership of the assets that generate the income by requiring copies of statements from your financial institution, brokerage statements, stock certificates or promissory notes.

Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.
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I am retired and my income is from pension or social security. What will I need to provide?

Depending on your complete financial situation, lenders may request that you provide copies of pension check stubs or bank statements to verify the amount of pension or social security you received.
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Do I have to provide information about my child support, alimony or separate maintenance income?

In accordance with federal regulations, information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying the loan.
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If I have income that's not reported on my tax return, can it be considered?

Generally, only income that is reported on your tax return can be considered when applying for a mortgage unless the income is legally tax-free and isn't required to be reported.

Some lenders may offer a stated income program, which means that you can be qualified for a loan based on the income you state rather than that which can be verified. Usually these programs require larger down payments and offer interest rates that are substantially higher than regular mortgage rates.
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Do lenders have special requirements for self-employed applicants?

First of all, most lenders consider you to be self-employed if you own more than 25% of the business you work in.

If you are considered self-employed, lenders may require that you provide one or two years’ personal tax returns, or portions of the returns to verify your income.

Typically, only the net income from self-employment that's reported on your tax returns can be considered when applying for a mortgage.
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I've had a few employers in the last few years. Will that affect my ability to get a new mortgage?

Frequent employment changes are typically not a hindrance to obtaining a new mortgage loan. This is particularly true if you made employment changes without periods of unemployment. Lenders will also look at your income advancements as you changed employment.

If you're paid on a commission basis, a recent job change may be an issue since it will be difficult to predict your earnings without a history with your new employer. Talk to your lender about the specifics of your situation before applying for a mortgage.
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Will my overtime, commission, or bonus income be considered when evaluating my application?

In order for bonus, overtime, or commission income to be considered, lenders commonly require that you have a history of receiving it and that it is likely to continue. If you haven't been receiving bonus, overtime, or commission income for at least one year, it probably won’t be given full value when determining the income that can be used to qualify you for the mortgage payment.
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Will my second job income be considered when I apply for a mortgage?

Typically, income from a second job will be considered by a lender if a one-year history of secondary employment can be verified.
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I'm getting a gift from someone else. Is this an acceptable source of my down payment?

Gifts are generally an acceptable source of down payment if the gift giver is related to you or your co-borrower, if applicable. Lenders may ask you for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.

In many cases if your loan request is for more than 80% of the purchase price, lenders require that you have at least 5% of the property's value in your own assets, excluding the gift funds. Prior to closing, you may have to verify that the gift funds have been transferred to you by obtaining a copy of your bank receipt or deposit slip.
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What will be required if I withdraw money from a 401(K) account for my down payment?

If you'll be withdrawing funds from a 401(K) or retirement account to fund your down payment, you may be required to provide evidence that you have the funds available by providing a recent statement from the account. You may also be asked to verify whether or not repayment is required. If it is, the lender will want to consider monthly payment when making your loan decision.
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