If you have applied for a home loan before, then income verification should be like clockwork. Download a few payslips, submit them to your mortgage broker, and have them submitted to your desired lender.
But if you’re a first-time home buyer shopping for a home loan, you may wonder how banks verify your income.
Income verification is not a walk in the park and involves many factors. It’s not simply how much you earn per year.
The following also needs to be addressed:
- How consistent is the income?
- How regularly do you receive the income?
- How likely will you receive the income in the future?
- How long have you been with your employer?
- Do you receive annual leave & sick leave?
Whether you’re a professional, a doctor, an employee, or a self-employed individual, how you earn and how much you earn will determine the loan you can take out.
Moreover, different banks and non-bank lenders require documents and proof to verify your income.
Here’s everything you need to know about income verification in home loans. Talk to our senior mortgage brokers at 1300 030 388 to discover how you can apply.
For self-employed borrowers
Since self-employed borrowers can make their payslips, banks typically require two years of tax returns, financials, and ATO notices of assessment showing your net profit before tax and a breakdown of how that income was derived.
Here’s a quick run-through of the different requirements for self-employed borrowers:
Sole Traders
Banks and lenders will require the following:
- ATO notice of assessment for the last two years
- Individual Tax Return for the last two years
Partnerships
- ATO notice of assessment for the last two years
- Individual Tax Return for the last two years
- Partnership Tax return for the last two years
Company
- ATO notice of assessment for the last two years
- Individual Tax Return for the last two years
- Company Tax Returns & Financials for the last two years
Trust (latest financial year)
- ATO notice of assessment for the last two years
- Individual Tax Return for the last two years
- Trust Tax Returns & Financials for the last two years
Salary/Payslips
Pay as you go (PAYG) employees who receive regular wages can submit their consecutive payslips as proof of income.
If you’re earning just your base salary & receive annual leave & sick leave, banks will typically only require your 2 most recent payslips (no older than 45 days)
Talk to our senior mortgage brokers at 1300 030 388 to discover if you qualify for a home loan.
Overtime/Commission Income
If you’re earning a stable income plus overtime pay and/or commission, you can verify the latter with the following documents:
- 2 most recent payslips. If the payslip doesn’t show overtime or commission earned, you must also provide your most recent payslip showing overtime and/or commission.
- If your year-to-date payslip doesn’t cover the entire six months, you’ll also need your last year’s PAYG summary or ATO income statement.
Some banks will require the latest payslips with overtime income up to 45 days before your loan application for fortnightly payments and up to 3 months for monthly payslips.
Bonus Income
If you’re earning a bonus income annually or regularly, your bank can verify this with the following:
- Payslips indicating bonus income for the past 2 years
Rental Income
If you have a rental property and are earning rental income, your bank can verify this with one of the following:
- The latest rental agreement (signed).
- Latest rental statement is printed under the real estate agent’s letterhead.
- Bank statement for the latest 3 months indicating at least 2 deposits from rental income.
- A tax agent prepared the rental property schedule and lodged the proof with the ATO.
What if I cannot provide all the required documents
Understanding what banks look at your documents to verify your income should help you supercharge your home loan application. Experience a smooth and seamless process by partnering with a mortgage broker to have them compile, prepare, lobby, and negotiate your home loan application with the best lender available.
Talk to our senior mortgage brokers at Mortgage Pros today and discover home loan options that best suit your needs. Call us at 1300 030 388 or enquire now to learn more.
