What is Verified Income?

How much do you know about the Dodd-Frank Act of 2010? Unless you work in financing or have extensive knowledge of the 2008 financial crisis, the answer is probably slim-to-none. The Dodd-Frank Wall Street Reform and Consumer Protection Act was passed in 2010 and targeted sectors of the financial system that were believed to have caused the 2008 financial crisis; these sectors include banks, mortgage lenders, and credit rating agencies. You might be thinking, "So, how does this affect me?" Prior to 2008, "stated income" loans, or loans that did not require income verification or documentation, became popular among borrowers and lenders alike. However, the lack of verification required for these loans became a large contributor to breakdown of the economy. Since the act was passed, lenders have new guidelines that require more documentation but less risk from the borrower. Another groundbreaking move under the Dodd-Frank Act was the establishment of the Consumer Financial Protection Bureau, which provides resources for consumers looking for more information about mortgage terms and details. The CFPB also actively works to prevent predatory lenders from taking advantage of misled borrowers.

What is Verified Income?

Now that you know a little bit about why lenders require proof of income let's talk about what qualifies as proof. Some lenders will require a proof of income letter that summarizes and verifies your current income and employment situation. In addition, you will likely be asked to show supplementary documentation to match your written statement. Your lender may ask to see the following, or more:

• Two recent pay stubs
• A copy of your previous years' tax return
• Wage and Tax Statement (W-2)

Usually, these documents will include your full name, social security number, income amount, employer name, and date. For borrowers with unearned income, your lender will also need to see documentation stating the amount and reasoning for the income. (Don't forget: your lender needs to know that your income amount will not put you at risk for foreclosure.) If you need to prove steady income for a short period, your lender may accept the following documents:

• Social Security Proof of Income Letter
• Annuity Statement
• Pension Distribution Statement (1099-R)
• Court-Ordered Agreements
• Unemployment Benefits
• Workers Compensation Letter

Self-Employed Borrowers

Self-employed borrowers may be wondering what category they fit into. How do you prove steady income when you write your own checks? At PacRes, we have a solution just for these unique borrowers called the Bank Statement Loan. This alternative program allows borrowers to use bank statements to analyze cash flow, rather than tax returns.

Loan Details

• Fixed and adjustable rates available
• Three different bank statement options used for income calculation*:
  • 24 months of business bank statements
  • 24 months of personal bank statements
  • 12 months of personal bank statements
• Loan amounts available up to $2.5 million
• Single Family Residences, including Condos, Non-Warrantable Condos, and Townhomes
• Owner Occupied and Second Home
• Interest-only option available

We're in the business of people, not profit, here at PacRes. You can feel confident that our Mortgage Advisors will guide you to the right loan for your long-term goals. For more information about our Bank Statement Loan, and other AltVantage programs we offer, start here.

Contact a Mortgage Advisor today for a complimentary consultation to learn more.

*Requirements vary based on your credit score and the amount of your loan compared to the value of the home (LTV).