What to expect with lender income verification

What to expect with lender income verification

You completed the online application, reviewed your rates, and selected a lending partner with terms you like—you’re ready to close your loan and get started on your next home improvement project.

But now your chosen provider is asking for documents to verify your income.

Your first question is probably, “Is that normal?” and your second is likely, “So what do I have to do?”

We’ll answer those questions (and a few more you may not have considered) in this short blog post.

Why does my lending partner need income verification?

It’s perfectly normal for a lending provider to verify your income. For example, Prosper, one of our lending partners, verifies either income, employment, or both on just under 60% of its loans, while Lending Club (another partner) verifies income on about 72% of theirs.

Online lenders routinely verify information you provided on your application as a final step before your loan is disbursed. They will verify your identity, for example, with a copy of your state ID or passport, or by comparing the information you supply with various identity-verification databases.

Beyond that, different providers use different algorithms, or formulas, to decide whether or not to verify other information, specifically income and employment. For example, your credit score may be within a particular range that requires income verification, or perhaps there’s a perceived disparity between your income and job title.

So don’t be alarmed if you’re asked to provide documents to verify your income—most people are before they close their loan.

The good news is that you’re very close to getting your money when you hit the verification step.

What do I need to do to verify my income?

That depends on the provider. In most cases, you’ll need to provide one or more of the following documents:

  • A recent pay stub.
  • Your W-2 form.
  • A bank statement to verify deposits.
  • Your most recent tax return.

Most online lenders make it extremely easy for you to submit the documents they need. You’ll be able to log into your account and simply scan and upload your paperwork—there’s no need to mail or fax anything.

How does this income verification compare to a home equity loan or HELOC?

Although it may seem inconvenient to dig up a document or two, this process is painless compared to the underwriting process for loans secured by your home.

Mortgage lenders typically ask for a massive amount of paperwork. In addition to all of the above items your online lender may request, you need to be prepared to give your mortgage bank some or all of the following:

  • A copy of your divorce decree if you receive alimony.
  • Profit and loss statements and 1099s if you are self-employed or do contract work.
  • Several months of checking and savings account statements.
  • An IRS form 4506-T, which allows the lender to access your tax transcripts.
  • Credit card statements, student loan statements, car loan statements, and statements from any other debts you carry.
  • Contact information for your employer.

When you put it in perspective, scanning a copy of your pay stub or your last W-2 really doesn’t seem like such a burden to get a home improvement loan.

What happens after I submit the required documents?

Verification is usually the last step before you get funded—your chosen lending provider has already decided to give you the money based on the information you supplied on your application. It’s just a matter of checking off the boxes so your lender knows all the information is correct.

Most lending providers complete the verification process very quickly once they receive your documents. In most cases, you’ll have your money within a day or two of sending them in.

And remember, we’re always here to help if you have any questions or problems during the verification process. Just email us at hello@gethearth.com and we’ll get you the answers you need to help you close your loan.