A common question that is asked when a client starts to consider a mortgage refinance or cash-out refi is: What documents are needed to refinance my home?  

The first step in answering this question is understanding how you report your income. Income Is primarily broken into three categories. They consist of: 


W2 Borrowers 

In most cases, W2 borrowers are salaried or hourly employees for a company and will report their earnings on their 1040 tax returns. W2 borrowers will need their last two years of W2’s, two most recent paystubs, and bank statements verifying the deposits. 


Self Employed 

If you own 25% or more of a business, you are considered a self-employed borrower. In some cases, self-employed borrowers may receive a combination of income types include W2 reportable income, K1 distributions, and other income types.  

With self-employed borrower’s lenders tend to look at the business they derive their income from to make sure the income is stable and sustainable.  

Typically, self-employed borrowers will need their last two years of personal 1040 tax returns, the last two years of their business tax returns, and a year-to-date profit and loss statement. 


Retired or Pension 

Retired or pension income we will typically require social security award letters, pension statements, and last two months of bank statement showing the deposits of income.


Income documents needed to refinance a mortgage 

The table below shows the most common documents needed to refinance a mortgage.

W2 Borrower 
  • Last two years W2’s 
  • Two Most Recent pay stubs- Covering 30 days. 
  • Bank Statements tracing the deposit of net Income. 
Self Employed (Ownership of 25% or more of a business) 
  • Last two years personal 1040 tax returns 
  • Last two years business tax returns (1120’s if LLC or S Corp) 
  • Two most recent years W2’s if paid a salary out of the business. 
  • Two most recent pay stubs- if paid a salary. 
  • Signed and Dated YTD profit and loss statement.  (P&L) Must have company name and the dates/periods the P&L covers 
Retired or Pension 
  • Last two years 1040’s tax returns  
  • Most recent Social Security award letter  
  • Pension Statement  
  • Last two years 1099R  
  • Last two months bank statements showing deposits of income. 


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Proof of Assets

Some lenders may require reserves depending on the lender and program. Proof of assets can take on many different forms. Below are common documents needed for proof of assets when refinancing a mortgage.  

  • Banking Statements- Last two months’ bank statements (checking and savings). Source and trail large deposits that are non-payroll 
  • IRA Account Portfolio along with a most recent monthly statement showing current account balance.  
  • Retirement Account Statements  
  • 401k Statements  
  •  Investment Accounts  


Mortgage Statements and Proof of Insurance 

All lenders will require mortgage statements and disclosure of any real estate property you own or have financed when you go to refinance your mortgage. 

You will need to start to gather all mortgage statements and proof of insurance for each property. All properties that are owned by the applicant must be disclosed and show proof of homeowners insurance.  

Most lenders require a declaration page for all homes owned by the applicant. Additionally, all properties that are owned by the applicant that currently carry a mortgage applicant must provide a current mortgage statement.


Valid Government Issued ID and Social Security Card 

Even though the refinance process can be done online and over the phone, the final loan documents will need to be executed with a notary.  

As part of the closing process, you will need a valid government-issued ID and social security card. Most lenders will require having these documents on file before submitting the loan for conditional approval.


Proof of Debts and Credit 

During the application process, the lender will need to pull what is known as a tri-merge credit report. This will show your credit scores and history across all three major credit bureaus (Experian, Equifax, and Transunion).  

The contents on the credit report are used to verify all debts and will be calculated in the debt-to-income ratio. 


What is Debt to Income 

Debt to income in the mortgage world is your monthly debts, often time pulled from your credit report divided by your total qualifiable income.

In many cases, a two-year average is used when calculating usable income. Also, for self-employed borrowers, this calculation can get a bit more complicated due to write-offs and other depreciation that business owners often use.  


Typical DTI Limits 

Fannie Mae <50% 
FHA 31% / 43%  

FHA Refer/Eligible Purchase & Refinance 


FHA Streamline Credit Qualifying 

37% / 47%  

  • If the client meets residual income requirements or has 3 months reserves: 
  • FHA Refer/Eligible Purchase & Refinance 
  • FHA Credit Qualifying Streamline 


38% / 45% FHA FICO 580-619 Purchase & Refinance 


50% FHA Streamline Non-Credit Qualifying 

Jumbo 40-43% 
VA 45%-60% 


What is Conditional Approval? 

All these documents requested will be submitted along with your mortgage application during the mortgage refinance process. 

These documents are reviewed by an underwriter which will provide conditional approval. The loan will be approved provided that the following conditions can be provided. 


What are common documents needed for conditional approval during a mortgage refinance? 

  1. Updated Paystubs 
  2. Updated Home Owners Insurance 
  3. Letter of Explanation on any disputed tradeline or accounts
  4. Other documents that may be required to support income requirements
  5. Updated Bank Statements
  6. Proof mortgage is current  

At Choice Home Mortgage we shop the rate for you through our network of wholesale lenders.  

Our mortgage professionals and processing staff will review your unique situation to find not only the best rates but structure the loan so that we can get it funded with the least amount of headaches. 

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