What Mortgage Lenders Ask About Your Income

by Jennifer Terflinger 08/11/2019

The process of applying for a mortgage is tedious and time-consuming; it requires you to answer personal questions about your finances. To ascertain your credibility for a mortgage, lenders structured the application process in such a way that allows them to get as much information about borrowers either directly or indirectly. 

Before you decide to apply for a mortgage; it's best you familiarize yourself with some of the possible questions the lender would ask about your finances. Because it involves a considerable amount of money, you should be prepared to answer questions about disparities in your income, why you defaulted in making any accrued payments and questions about your credit history. 

Below are some of the possible questions your lender would ask relating to your finances. 

How long have you earned your present income?

Lenders want to ascertain if you have earned your present pay for over two years. If you just got promoted or got a salary raise recently, this is good. However, what most lenders are looking out for is a consistent income amount for the last year. If they are not sure of your income, they would take a look at your W-2s for previous years and your pay stub for the present year. Before you go ahead to make an offer for a house, ensure it's an amount your current income will support.

How often you get paid?

A lender wants to ascertain how much income you earn, how your pay is derived, and the steadiness of your salary or irregularity of income. If you receive a steady means of income, your annual salary would determine how much mortgage you get – if your income varies, you might be required to provide details. 

The disparities in your income

If your income keeps changing each year either positively or negatively, come prepared to explain the reason behind the fluctuation. If your revenue decreased from the previous year, there is every possibility the underwriter would select the worst period in the last two years to determine how much you get on a mortgage. However, if your income increased in the previous year, the underwriter would take the average of the last two years to determine your mortgage value. If your income rises yearly either due to promotion or a new position, get someone from your human resource department to write a letter to that effect. 

If you are new at your job

Being new at a job doesn't affect your application for getting a mortgage – as long as you are receiving either a salary or a full-time hourly rate. Some lenders even grant loans to individuals who haven't gotten their first paycheck if they have a fully executed employment contract. 

If you earn commissions 

If you are a salesperson who earns a commission, you would need to provide two full years of tax returns to determine non-reimbursed business expenses you wrote off. 

Before applying for a mortgage, ensure you take a second look at all your finances and identified anything that could act as a deterrent so that your application has the best chance of being approved.

About the Author
Author

Jennifer Terflinger

After 35 years working in the corporate world in the oil and gas industry, I retired to pursue my dream of being self-employed. 

I come from a training and learning environment, helping people to achieve their goals. 

Having obtained my license as a Broker/REALTOR® in July 2015, helping people achieve their dreams of home ownership has been an easy transition.  I closed 18 transactions in my first year with 4 pending closing before the end of 2016.

Your real estate transaction is something I take very seriously. I understand it is all about YOU, your needs and lifestyle, and I am committed to protecting you legally and financially. 

I prefer to spend ample time with you to go through the details so you get where you are going with complete certainty so we can discuss what to expect and how to prepare for the unexpected.

In most endeavors it’s all about the details, and I'm committed to working through them. My commitment to honesty and transparency will provide the impetus you need to make your home ownership dreams a reality.

I am active in my community through my church and I also enjoy reading and of course spending time with my grandchildren.

Why don't you call me to assist with all your home buying or selling needs. You won’t be disappointed!

Here's what some of my most recent clients have said about me.

Jennifer Terflinger is the best! I had not purchased a property in 20 years. She was professional and polite and extremely patient with me. She answered any and all questions with all the knowledge and expertise. Would definately use her again.

Leigh, Wallace, NC

Jennifer Terflinger is a very highly experienced real estate agent. We really enjoyed working with her in finding our new home. My husband and I plan to use her in the future for any other real estate sales or purchases.

Max and Donna