Lenders look for two main things when reviewing loan applications: a borrower’s willingness to pay back the loan and their ability to pay it back. The first is typically based on credit score, and the second is gauged by proof of income.
When you submit to Roadrunner’s Credit Builder program (550-650+ FICO), we may ask for income verification. If you’re told that an application needs proof of income, then it’s time to gather some stipulations.
Income stipulations, frequently referred to as stips, are a necessary but sometimes tedious part of the financing process. To make your day less about stipping and more about selling, the key is to send good stips. That way, you only have to send it once and you’re home free. Here’s 3 parts of a good income stip.
1. Send in a Readable Format
Downloadable, digital formats (like PDFs or image files) are the easiest way to send income stips. Digital pay stubs and bank statements (PDF) are usually available in this day in age. If they’re not, then a scan or picture (image file) of the paper document is acceptable. As long as the income stip can be matched to the applicant and is legible – if you can’t read all the details, then most likely our Underwriting Team can’t either!
When you ask your customer for income stips, they may show you their mobile banking app. A screenshot of transactions from online banking isn’t an acceptable stip – but that doesn’t mean that you need to send the customer home!
In your customer’s banking app, they most likely have access to digital bank statements. They can email these to you, no hard copies necessary. Or, they can screenshot the statement itself (a screenshot of the statement works, but a screenshot of the account record does not).
2. Match the Applicant to The Stip
Acceptable income stipulations are clearly linked to the applicant, especially by name. Make sure that the applicant’s name is clearly visible on stips so that they can be verified easily. Their employer or bank name will also be verified, so try to include those too.
Sometimes there are two names on income stips- like if your applicant has a joint bank account. The bank statement for a joint account will be verified by name as well, or sometimes employer name (like if there are two salaries coming into the account).
If your applicant can’t be verified based on a joint account statement, then the other account holder may need to be added to the application. If the stip can’t be matched to the applicant, then verifying the stip will take more time.
3. What You’ll Have to Submit Again
To avoid having to submit an income stip more than once, follow steps 1 and 2. Your financing process will be smoother and your deals will close faster!
The documents that are ineligible for income verification at Roadrunner Financial are: checks, online banking screenshots, settlement statements (truck drivers can have these), anything handwritten, and any document older than two months. Tax returns are an exception to that two month rule.
If you ever have a question about income stips, give the team a call at (646) 370-5471. You can also check out our underwriting guide for more details.