How Does A Mortgage Underwriter Verify Income?

The mortgage underwriting process is essential to verify income and ultimately determine whether the loan is approved or not. In addition to examining your income, the underwriter will also dive into significant events such as recently graduating from school, switching careers, or starting a new business.  

Because the amount of money being loaned is substantial, the verification process can be tedious and requires plenty of documentation to get it done.

This overview will give you an idea of what to expect during the underwriting process to better prepare for it. Have specific questions about underwriting? Contact us!  

What are the income requirements when applying for a loan?

When applying for a loan, the question is not about how much income you need to qualify but how much of your income you’ll be spending on your mortgage and other debts. Most lenders practice a rule of thumb that your mortgage payments should not be more than 28% of your gross income. Your DTI or debt to income ratio should also not exceed 36%. 

Some lenders may allow a DTI of 43% as long as you have good credit or if you can afford to place a large down payment. 


Underwriters need to determine if you have adequate income to make your monthly mortgage payments. The majority of underwriters follow Fannie Mae and Freddie Mac guidelines, but standards may vary. 

To improve the chances for approval, you need to prepare pay stubs for the last two to three months, W2 forms and tax returns for the previous two years, profit and loss statements, and bank statements. They do this to check if your income stated matches the income reported. They also want to verify your employment status with your employer. 

Things may get a little tricky if your income is dependent on bonuses and commissions. Underwriters will need to see two years’ worth of bonus or commission income to consider it as part of their income.  

The requirements get more challenging if you are self-employed. 2 years of income from your business is usually required, and in place of W2s, you need to prepare profit and loss sheets, balance sheets, and personal and business tax returns.

It’s not unusual for the underwriter to come back with questions about your submitted documents, so don’t be alarmed. Respond quickly and submit at once to make the process faster. Underwriters will know your income, so there’s no need to hide any information. Being upfront can go a long way in getting your loan approved.

* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information. 

Related Posts

April 13, 2022

With many TV shows depicting house flippers having fun while making a profit, many investors have taken interest in the idea. In 2019 alone, 6.2% of all home sales in the U.S. were flipped homes! It sure looks easy on TV –buy a house, fix it up, put it back on the market, and make an …

Mortgage For A Rental
April 6, 2022

Purchasing your first rental property is a big step in your real estate investor journey. Aside from choosing a potentially profitable property, you need to figure out how to finance your rental. Before sharing how to apply for an investment loan, et’s look at how a primary home mortgage differs from a rental property mortgage. …

Non-QM Loans
March 30, 2022

Buying a home is part of the American dream, but what if you don’t qualify through traditional means? This is an issue that self-employed and other non-W2 workers often face, since their proof of income and employment differs from what lenders typically require. The good news is that those who don’t meet the criteria for …

Closing Costs
March 23, 2022

As with any type of mortgage, VA loans have fees associated with getting the loan. These fees are often called “closing costs,” and they are paid to the lender for services rendered in creating and processing your mortgage. Note that closing costs must be settled before the loan can close and the funds distributed. How …

Reverse Mortgage
March 9, 2022

Reverse mortgages have helped countless senior homeowners convert a portion of their home equity into much-needed cash to provide added income during retirement. This type of loan offers many advantages for seniors, and it’s no surprise that many have been applying in recent years. If you think a reverse mortgage is right for you, contact …

March 2, 2022

Through the VA home loan program, millions of veterans and service members have become homeowners. VA loans are favored for the following reasons: lower mortgage rates, no PMI required, no down payment necessary, and, to an extent, no minimum credit score requirements. While the Department of Veteran Affairs does not set a minimum credit score, …

WordPress Video Lightbox