W2s and tax returns

[cjd]

I'm going to make the leap to try and buy my first home. I now live in a HCOL area and am worried about income qualifications. What are mortgage lenders looking for when they request W2s, paystubs and tax returns? My 2020 W2 shows income of $47,000. 2021 shows $67000. I don't know what the 2022 W2 will show but my last paystub of 2022 will probably show end of year earnings around $102,000. Thanks!

[pizzadude]

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@cjd wrote:

I'm going to make the leap to try and buy my first home. I now live in a HCOL area and am worried about income qualifications. What are mortgage lenders looking for when they request W2s, paystubs and tax returns? My 2020 W2 shows income of $47,000. 2021 shows $67000. I don't know what the 2022 W2 will show but my last paystub of 2022 will probably show end of year earnings around $102,000. Thanks!

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Generally as part of the underwriting / approval process, lenders are verifying both your income ( from W2s / Tax returns ) and other debts ( from credit reports ).   Together these will determine what size of monthly payment you can afford and consequently, what price range of house you could potentially purchase, when factored in with down payments. 

[Mortgage-Specialist]

Big differences in your W2s. What's the reason behind that?  As a loan officer, I wouldn't present your 2020 W2 to underwriting since its so low. I'd present your 2021 W2 and current YTD and wait for your 2022 W2 to come in. Underwriting would most likely average 2022 and 2021 income unless there's the proper reasoning for the increase

[Meach7]

If you're waiting for your 2022 W-2 do just as @Mortgage-Specialist said. You only need the 2 years. Your income is going up and so you shouldn't have to do much explaining if any. So long as it's verifiable. If it's commission based they will likely average the two years. 

[cjd]

The holy grail of academia- landing a tenure track job. 2020 I was a postdoc, 2021 9 months of postdoc and then starting as an assistant professor. This year is first full year as a prof. I've spent the time paying down the debt from being underpaid so I'm in a much stronger place financially but I look at interest rates and kinda wince.

[Mortgage-Specialist]

With a  newer position/raise they wouldn't necessarily have to average your income. Depending on how your pay shows, it's possible your current income would be used without having to average it

[ShanetheMortgageMan]

Sounds like you'll be on salary, if so, then you shouldn't have any trouble using it as soon as it becomes effective.

This may not apply to your situation but sometimes a paystub reflecting the new salary is needed prior to closing, but with other documentation of the new salary (like something from HR) then some lenders will allow you to provide that post-closing instead.