We are one month into the New Year, many people are a few weeks into progress on their plans for 2016, if one of your resolutions was for smoother loan approvals and fewer problems then I have a few reminders for you to help January and February applications.
When getting your income document verification, the new year cross over can cause some delays in underwriting for these common problems.
New Years Items To Look Out For
The first issue is paystubs, the first rule is the paystub can be no older than 30 days prior to application. But be careful if your application date is somewhere in January, the borrower may provide a January paystub which on the surface seems like it will work. But that paystub may not meet the second requirement for FHA and FHLMC. They also require that the paystub reflect a minimum of 30-day history on the paystub totals. So if your borrower hands you a January 15th paystub it will not show the minimum time frame required and you will need to ask for additional consecutive paystubs back a few weeks to make sure you are showing a full 30-day history.
New Years W2 Form
The second issue is in regards to when your borrower must provide a 2015 W-2 form. Per the IRS employers have until February 2nd, 2016 to provide your W-2. That means the “most recent” W-2 technically is the 2014 until February 2, 2016. So this answer may vary from company to company a few days but the answers for what W-2 should be required for borrowers with applications dates up to Jan 31 – Feb 2nd would be 2014. There is no harm in providing the 2015 W-2 earlier, and if you are going to use variable income it probably is going to be needed along with a VOE to support those variable income types (part time, overtime, commission, etc).
Third issue is for the self-employed borrower, the question is what tax return is considered the most recent. This year tax day is April 18th so you can use your 2013-2014 tax returns with any application from now until April 18th. One downfall to using these years is some programs (FHA comes to mind) will require a YTD P/L since we are way past the last filing of the borrowers returns. If you choose to use the 2015 tax returns the challenge with those is they will not have the IRS Transcripts to back them up just yet. Most banks/investors will however accept these new returns as long as you provide some evidence they have been filed and received by the IRS. You can do this by providing a copy of the stamped and signed returns dropped off at the IRS. Or you can show electronic filed returns with the emails that the IRS provides stating they received the return supported by either evidence of taxes paid for those who owe IRS money, or funds received for those who are getting a refund.
We hope this blog helps you have a smoother loan application during the first few months of 2016. We plan on bringing you more helpful content throughout the upcoming year! Here’s to improved and more profitable originations.