Income and Assets: What Matters to NLC?
When submitting a loan application to buy and finance a home, there are multiple things NLC needs to review. The most important are your income and employment, your credit history and credit scores, and your assets. Not what your plans are for Christmas, although our Mortgage Advisors are interested in that on a personal level.
Verification of income for self-employed borrowers will be asked to provide their last two years of income tax returns both personal and business as well as a year-to-date profit and loss statement. If you’re not self-employed, you’ll be providing your last two years of W2 forms along with your most recent pay check stubs covering a 30-day period. NLC, and all lenders, want to make sure you are financially able to repay the new mortgage along with other monthly credit obligations.
NLC will also look at assets being used to buy and finance the home. First, we need to make sure there are enough funds available for a down payment and closing costs. Your NLC Personal Mortgage Advisor will provide you with a loan cost estimate which will itemize the various closing costs you might encounter at your settlement.
There will also need to be a certain amount of cash available after the transaction has closed. These amounts are referred to as “cash reserves” and are tabulated as the number of months of mortgage payments in a liquid account. If the new mortgage payment, including taxes and insurance, is $2,000 and the loan program asks for six months of cash reserves, you’ll need to show you have $12,000 available in addition to the funds needed for your down payment and closing costs.
NLC’s underwriters will also look at your bank statements to make sure the funds belong to you. Your name will need to appear on the statements. If there is another name on the statements, that person must provide, in writing, permission for you to access all the funds in the account if that person is not buying the home with you. Otherwise, you’ll be attributed 50 percent of the total, not the entire amount.
Finally, all lenders want to verify the deposits on the account are coming from a legitimate source. Most often there will be deposits on the 1st and 15th for example. NLC can match these deposits up with your pay check stubs. If self-employed, the profit and loss statement should show a similar amount of deposits reflected as income and deposited in an account. If there are any deposits that cannot be sourced, those funds may not be counted toward available cash to close.