Proving your Income to a Lender

One of the most critical aspects of gaining mortgage approval is showing concrete evidence of your income. The reason for this is to show a lender your ability to meet your mortgage repayments every month and to assess how much (using their credit criteria) they will commit to lending you.

For PAYE workers you must evidence your income in several ways:

1.Three recent payslips
2. a P60
3. Salary certificate completed by your employers
4. Bank statements for the previous 6 months

What does a bank determine from this?

Your payslips show how much you are earning every month, the net amount should then correspond with the lodgements into your bank account every month (unless you are paid fully/partially in cash). It will often show pension contributions, expenses/mileage and other vital information (in some cases credit union loans come out of wages for companies that have a Credit Union attached to them).

A P60 will show your previous years earnings and if you look at monthly payslips versus a P60 you simply multiply by 12 to see what the full years earnings are expected to be for the current year, if it is lower you will be asked why (could be due to seasonal overtime for instance – eg: a person who works double shifts every Christmas will not have earnings year to date representative of that in August).

A salary certificate is a form that is filled out and stamped by your employer, it provides the third employment based confirmation of income and helps to cement together the other information supplied. Some companies won’t fill in salary certs and instead will only offer a letter, this will usually suffice if a salary cert is not forthcoming.

Bank statements are perhaps the most transparent interpreter for an underwriter, they show a persons spending habits, where and what they buy and if they manage their debts efficiently. For instance, referral charges mean you are going beyond your account limit, the bank is allowing this but it is not automatically authorised. If you are renting then that is taken as evidence of ability to repay a loan, therefore an underwriter will look for that rent going out.
If you are self employed you will generally need  the following:

1. A set of accounts for your business provided by a qualified accountant
2. Your accountant must provide confirmation your tax affairs are up to date.
3. Business and personal accounts

Lenders must be satisfied they can evidence what you say you earn and also your income is verified for tax purposes. Income from your work that is not verified for tax purposes will normally not be considered.

Today’s post comes to us compliments of David O’Neill who is a Finacial Adviser with Irish Mortgage Brokers and holds his QFA (Qualified Financial Adviser diploma) If you want to contact David you can do so on 016730417 or email him [we write it to avoid spambots] david dot oneill at mortgagebrokers dot ie

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