If you’re looking into Rexburg home loan options, you need to understand the different kinds of income verification required, which vary, depending on whether you are self-employed, receive a W2 from an employer, or a combination of both. The mortgage underwriter is required to create a 24 month average income for you, to calculate what you will be able to repay. In general, a debt to income ratio of 43% is the most allowed.
Here is quick rundown of forms to provide, depending on your employment status.
- W2:This is the form an employer issues stating an employee’s gross income
- 1040: This is the personal federal income tax return.
Someone applying for a self-employed home loan will also have to provide some of the following:
- 1120 for a corporation
- 1120S for an S corporation
- 1065 for a partnership
- K1: this form shows business expenses and income that are passed on to you through the business. It also shows your ownership share, which is very important when considering a home loan in Rexburg.
Employment Matters When Securing a Home Loan in Rexburg
The reason your share in the business matters so much is that those who own a share of 25% or more will apply for a self-employed home loan, while those who own 24% or less will not be counted as self-employed. People researching Rexburg home loan options should keep this in mind if they are employed in a business in which they also have a share of ownership.
The other aspect of income verification to keep in mind is income stability. If you’re considering home loans in Rexburg while considering starting a new company, you should be aware that a two year income history is necessary to secure a home loan. This means you either have to have at least two years continuous employment, or your business license must be at least two years old. Typically your options are to either buy your home before you start your business, or to be on the safe side, wait until your business is at least two years old and stable before going house hunting.
