Can I Use an Offer Letter as Proof of Income for Mortgage?

Securing a mortgage requires lenders to evaluate a borrower’s financial stability. Income verification is a primary factor in assessing an applicant’s ability to repay a loan. This process ensures the lender is confident in the borrower’s capacity to meet ongoing mortgage obligations.

Standard Mortgage Income Verification

Mortgage lenders rely on established income documentation that provides a historical record of earnings. These documents are preferred for their verifiable nature and consistent income stream. Common forms include W-2 statements, recent pay stubs, and tax returns.

For salaried or hourly employees, lenders request W-2 forms for the past two years, along with pay stubs covering the most recent 30 to 60 days. These documents confirm current earnings and income stability. If an applicant’s income includes bonuses, commissions, or overtime, lenders look for a two-year history to assess consistency.

Self-employed individuals face different documentation requirements. Lenders require personal and business tax returns for the past two years, including all schedules like Schedule C. They may also ask for profit and loss statements, business bank statements, and attestations from a certified public accountant to verify income. The goal is a stable net income to cover mortgage payments.

Offer Letters as Income Documentation

An offer letter can serve as income proof for a mortgage, especially for individuals starting a new job, relocating, or transitioning careers. Lenders consider a signed job offer letter as income proof when traditional W-2s or pay stubs from the new position are unavailable. This applies to recent graduates or professionals moving to higher-paying roles.

For an offer letter to be acceptable, it must contain specific, non-contingent employment details. The letter should state the borrower’s name, employer’s name, job title, and annual salary or hourly wage. The offer must indicate full-time status or guaranteed hours, and the start date for the new position should fall within 60 to 90 days from the mortgage closing date. It must be non-contingent, with no outstanding conditions like background checks or drug tests.

Lenders require supplementary documentation to support the income claim and assess financial stability. Borrowers need to provide bank statements showing sufficient reserves, equivalent to three to six months of mortgage payments, to cover expenses until new income begins. Previous employment history, such as W-2s from prior jobs, or educational transcripts (for recent graduates), demonstrates a consistent career path or earning potential. Prepare an explanation for any significant employment gaps. These documents provide lenders confidence in the borrower’s financial capacity and stability.

Lender Verification and Underwriting

After a borrower submits their offer letter and supporting documentation, the lender initiates a verification and underwriting process. This phase confirms the accuracy of information and assesses loan risk. The lender verifies employment directly with the new employer.

Lenders contact the employer’s human resources department or a contact to confirm employment status, stated salary, actual start date, and likelihood of continued employment. Verification occurs through phone calls, emails, or third-party services accessing payroll data. A verbal verification of employment is common shortly before closing to ensure the borrower’s employment situation has not changed.

The underwriting department reviews all gathered information, including the offer letter and verification results, to evaluate income stability. Underwriters assess factors like industry, company health, and career progression to determine income continuity for at least three years. They calculate the debt-to-income ratio based on verified income, aligning with guidelines, typically not exceeding 43% of gross income. Underwriters also scrutinize financial reserves, confirming adequate funds for transition and expenses. This review ensures the loan aligns with lender risk parameters and regulatory requirements.