A reader asks, “I threw out my pay stubs not knowing that I would be purchasing a home this soon. Is there anything else that can be used in place of pay stubs to get approved for an FHA loan?”
“I provided copies of my last four pay checks, a statement from my employer showing my cumulative earnings so far this year, my original W2s from 2014 and 2015, my federal and state taxes from 2014 and 2015, and three months worth of bank statements that show the direct deposit from my employer every two weeks for those three months.”
In general, you may find that tax documentation, current pay stubs, and bank statements COULD provide an acceptable substitute, depending on the lender.
However, this is a situation that requires a borrower to have a conversation with the loan officer to determine what might be acceptable. Income verification is an important part of the FHA loan application process; FHA has rules that govern what the lender must do to complete that verification. But FHA loan rules aren’t the only guidelines that affect how the lender must do her job-lender standards also apply.
That said, what does the FHA loan rulebook say about this type of documentation? FHA loan rules in HUD 4000.1, page 187 offer some guidelines to the lender:
“If using alternative documentation, the Mortgagee must:
–obtain copies of the most recent pay stub that shows the Borrowers year- to-date earnings;
–obtain copies of the original IRS W-2 forms from the previous two years;
–document current employment by telephone, sign and date the verification documentation, and note the name, title, and telephone number of the person with whom employment was verified.”
So using alternates to a set of pay stubs may be acceptable under FHA loan rules, but the lender may have additional requirements. Also, state law or other factors could also have a say in how such situations are handled depending on circumstances.
The most important thing for many potential FHA borrowers to remember is that you can gather these details or find out how to collect them at the appropriate time while in the planning stages of your loan.
It’s important to come to the FHA loan application process as fully prepared as possible. If you start planning for an FHA mortgage, you may wish to start gathering your required documentation during this time including making copies of your tax records, etc.
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