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Supporting Financial Information

These items are typically the same required by a borrower when applying for a loan. The lender may require the seller to provide from 2 months to 12 months of the following supporting financial information.

  • Pay stubs. Pay stubs allow the lender to see if the monthly takehome pay would cover the loan payments plus all the other monthly expenses. If the owner is unemployed, there will be no pay stubs to include.
  • W-2s and/or signed tax returns. The lender is trying to get a complete picture of the owner's financial situation. Is the owner's income going up or down? Would the borrower be able to make payments if the lender agrees to a repayment program?
  • IRS Form 4506. A request for a copy of tax return may be required by the lender.
  • Bank statements and credit reports. Again, the lender wants to be sure the borrower is truly unable to make the payments and these support that. The bank will order a credit report on the borrower but if the seller have one available attaching it is a benefit.

Any explanation of the seller's financial status that differs from what they put on their original loan application to get the mortgage could become a problem for the seller. If the lender sees an enexplained difference between what was stated on the application to get the loan and what is now being used to get out of the loan it could raise the question of loan fraud. If the seller is concerned or has questions they should consult with their attorney.