Name: Mortgage Mark
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When buying or refinancing a home in Texas, you might assume there’s a straightforward list of income verification documents you need. However, every mortgage program has its own set of rules.

Below is a comprehensive guide—from the general rule of twos (two pay stubs, two years of W-2s, two years of tax returns) to special scenarios like self-employment or contract work.

This guide combines the most common requirements and valuable insights from our video to help you navigate the process more confidently.

Texas Income Documents: General Overview

“It’s hard to make a video saying, ‘Here’s exactly what you need,’ because different programs have different requirements.” – Mark

This quote sums it up perfectly: one size does not fit all. Most lenders, including those in Texas, rely on automated underwriting systems (like Fannie Mae or Freddie Mac) to determine what’s required based on your unique situation.

Sometimes, you’ll only need to provide 30 days of pay stubs and one year of tax returns if the system sees you as a low risk. Other times, you’ll need the full slate of income verification documents.

Rule of Twos

Two years of W-2s
Two years of tax returns (personal—and business if you own more than 25% of a company)
Two pay stubs covering 30 days

Why 30 days of pay stubs? February has 28 days, so if you only submit February’s pay stubs, it might not be enough. Lenders want a full 30 days to confirm your recent income—especially when you’re applying for a mortgage in a competitive market like Texas.

Common Scenarios in Texas

Stable, W-2 Employee at a Large Company

If you work for a Fortune 500 or similarly large employer, put down a healthy down payment, and have strong credit, the lender may require fewer documents. Sometimes only a recent pay stub and one year of tax returns suffice.

Nevertheless, always provide your HR contact information. Lenders call HR a couple of days before closing to confirm you’re still employed.

Bonus, Commission, or Overtime Income

If a significant portion of your income comes from bonuses, commissions, or overtime, expect additional scrutiny.

Lenders want to see consistent or increasing earnings. A decline from one year to the next could trigger requests for more documents or explanations.

Self-Employed or Business Owners

You are considered self-employed if you own 25% or more of a business. This applies whether you’re a sole proprietor, in a partnership, or part of an LLC/Corporation.

Typically required:

Personal Tax Returns (last two years, all pages and schedules)
Business Tax Returns (last two years, all pages and schedules)
K-1s to verify ownership percentage
Year-to-Date (YTD) Profit and Loss (P&L) if you’re closing between April and December

Contract or Temp Work

If your contract is about to expire or you’re on a temp assignment, lenders need to verify you’ll continue to have steady income. You may need an employment contract or extension letter.

If you’re starting a new job soon (within 30 days), lenders might consider that income if your offer letter is fully executed with no contingencies (like pending drug tests).

Starting a New Job

Moving from one employer to another? If your start date is within the next 30 days and you have a non-contingent offer letter, there are loan programs that can work with that.

Keep in mind that if the letter mentions conditions (like a background check or licensing exam), you’ll need to clear those before the income is considered final.

Master Checklist: Texas Mortgage Income Document Requirements

Use this checklist to gather your Texas income documents and streamline the process. Provide only the documents that apply to you—no need to chase down everything if you don’t receive pay stubs or aren’t self-employed.

1. Pay Stubs – Most Recent 30 Days

Consecutive pay stubs covering a full 30 days.
Must show Year-to-Date (YTD) income and employer name.
If your income has changed in the last 12 months (e.g., raise, new bonus structure), let us know.

2. HR or Manager’s Contact Info

Name, phone, and email for your HR rep or manager.
We’ll contact them before closing to verify you’re still employed.

3. W-2s for the Past Two Years

Even though tax returns show your total earnings, W-2s verify each employer.
For instance, if you had multiple jobs in one year, each W-2 breaks down which employer paid you what.

4. Federal Tax Returns (All Pages & Schedules) for the Past Two Years

Let us know if you’d prefer we reach out directly to your CPA for these.
If you haven’t filed your most recent taxes, you may need to show older returns plus an extension form.

5. Employment Contract (Contract or Temp Employees)

If you have a written contract, provide it.
If you don’t have a contract, tell us immediately so we can adjust your application accordingly.

6. Self-Employed Individuals (Own 25%+ of a Company)

K-1s for the past two years (verify ownership).
Business Tax Returns (all pages, all schedules) for the past two years.
Year-to-Date Profit and Loss if closing on your loan April–December.

Why Lenders Ask for So Many Texas Income Documents

“If there’s a decline in commission or bonus, we start asking questions.” – Mark

Lenders—especially in Texas, where home prices vary widely between urban and rural areas—want to ensure you can maintain your mortgage payments. Providing complete income verification documents helps them see a clear picture of your financial stability. Automated underwriting systems also factor in your credit score, down payment amount, and asset reserves. If something flags you as a higher risk, the system could require more documentation.

Self-Employed? Proof of Income Documents for Self-Employed

If you own 25% or more of a business—whether it’s a sole proprietorship, partnership, LLC, or S-corporation—you’re considered self-employed by mortgage industry standards. This classification impacts the income verification documents you must provide to qualify for a home loan in Texas.

Common Questions Self-Employed Borrowers Have

Why so many documents?

Mortgage underwriters want to see a clear pattern of stable or increasing income over at least a two-year period. Self-employed individuals can have fluctuating business income, so lenders review more documentation to ensure you can handle the mortgage payments.

Which specific forms are needed?

You’ll typically need:

Personal Tax Returns (most recent two years, with all schedules)
Business Tax Returns (most recent two years, with all schedules)
K-1s for each business you own 25% or more of (these verify your ownership percentage and income distributions)
Year-to-Date (YTD) Profit and Loss Statement (if you’re closing April–December, or if a lender specifically requests it)

What if my income varies year to year?

Underwriters look for consistency. A slight drop in earnings might trigger extra documentation or a written explanation. If you experienced a one-time business expense or investment that temporarily lowered your net income, you can often explain this in a “letter of explanation.”

Why do they need all pages and schedules?

Details like Schedule C (for sole proprietors) or Schedule E (for rental properties, partnerships, or S-corporations) show how your income is calculated. Missing pages can delay underwriting because the underwriter needs the complete financial picture to proceed.

What about my business bank statements?

Some lenders may request business bank statements to confirm cash flow. If you frequently transfer personal and business funds, be prepared to document those transfers to show how your business profits translate to personal income.

Can my CPA send documents directly?

Absolutely. Many self-employed individuals prefer their CPA to provide up-to-date tax returns, extensions, and P&L statements. Just ensure your CPA is responsive and knows the lender’s deadlines to avoid delays.

Steps to Strengthen Your Loan Application

Maintain Clean, Organized Financials

Thorough record-keeping makes the underwriting process much smoother. Keep separate personal and business accounts and ensure you have clean bookkeeping for expenses and receipts.

Save for a Larger Down Payment

Self-employed borrowers may benefit from a more substantial down payment to reduce perceived lender risk, potentially leading to better interest rates or fewer documentation requests.

Build Up Your Cash Reserves

Having extra months of mortgage payments in reserves can reassure underwriters you’re prepared for slower months or seasonal downturns.

Explain Major Variances

If you had a particularly high or low income year, include a brief note explaining why. This might be due to a one-time capital investment, a major contract, or an unforeseen personal event.

Key Takeaways

Two Years of Returns: Underwriters almost always want two full years of returns for self-employed borrowers, though there are occasional exceptions if your overall financial profile is extremely strong.
Consistency is King: Predictable or improving income patterns inspire confidence in lenders.
Documentation Matters: Providing full, accurate, and timely documents up front can save you from multiple requests and underwriting delays.
Communication is Critical: Stay in touch with your CPA, lender, and any co-owners of the business to streamline document collection.

Ready to Get Started or Have Questions?

Every borrower’s situation is unique. If you’re still unsure which Texas income documents or income verification documents you need, reach out to The Mortgage Mark Team. We’ll guide you step by step, ensuring you’re prepared for a smooth closing.

Tip: Keep lines of communication open with your employer, CPA, and lender. Quick responses to document requests speed up the entire process.

When you think mortgage, think Mark! And don’t forget to share this information or subscribe for more updates on everything related to Texas mortgages and income verification. We’re here to help!

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