Understanding Verified Income: A Comprehensive Guide for Borrowers

Have you ever come across the term 'Dodd-Frank Act of 2010'? Unless you're part of the finance industry or have a profound understanding of the 2008 financial crisis, it's unlikely that you would be familiar with it. This act, officially known as the Dodd-Frank Wall Street Reform and Consumer Protection Act, was enacted in 2010 as a response to the sectors of the financial system, such as banks, mortgage lenders, and credit rating agencies, that were widely believed to have contributed to the 2008 financial crisis.

You may wonder, "How is this relevant to me?" Before 2008, 'stated income' loans—loans that didn't require income verification or documentation—gained traction among both lenders and borrowers. The absence of income verification became a significant factor leading to the economic downturn. However, post the enactment of the Dodd-Frank Act, lenders must now adhere to new guidelines that demand comprehensive documentation, thereby reducing the risk posed by borrowers. This act also led to the formation of the Consumer Financial Protection Bureau (CFPB), which assists consumers in understanding mortgage terms and prevents predatory lending practices.

What Does Verified Income Mean?

Now that you have some background on why lenders mandate income verification, let's delve into what constitutes as proof of income. Most lenders, such as CrossCountry Mortgage, ask for a proof of income letter, a document that outlines and validates your current income and employment status. To corroborate this statement, you might need to provide additional documents such as:

1. Two recent pay stubs
2. A copy of your previous year's tax return
3. Wage and Tax Statement (W-2)

These records should include your full name, social security number, income amount, employer name, and date. Borrowers with non-employment income will need to provide documents detailing the source and amount of this income. Remember, your lender needs to ensure that your income level won't put you in jeopardy of foreclosure.

For those requiring proof of short-term income stability, the following documents may be acceptable:

1. Social Security Proof of Income Letter
2. Annuity Statement
3. Pension Distribution Statement (1099-R)
4. Court-Ordered Agreements
5. Unemployment Benefits
6. Workers Compensation Letter

Guidance for Self-Employed Borrowers

Are you self-employed and unsure about income verification? At CrossCountry Mortgage, we offer a unique solution for you in the form of the Bank Statement Loan. This innovative program allows you to use bank statements for income analysis instead of tax returns.

Loan Details:

• Fixed and adjustable rates available
• Three distinct options for income calculation* via bank statements:
  • 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
• Applicable to Single Family Residences, including Condos, Non-Warrantable Condos, and Townhomes
• Available for Owner Occupied and Second Home
• Interest-only option available

At CrossCountry Mortgage, we prioritize our clients' interests over profits. Our team of Mortgage Advisors will guide you towards a loan that aligns with your long-term goals. For further details about our Bank Statement Loan and other AltVantage programs, reach out to a Mortgage Advisor for a complimentary consultation today.

*Please note: Requirements may differ based on your credit score and the loan-to-value ratio (LTV) of your home.