What is Income Documentation? - Definition

What is Income Documentation? - Definition
Income Documentation – Income Documents are used to prove a borrower’s ability to pay. A borrower’s ability to pay is one factor used to determine risk
to a Lender. Because the documentation represents

one layer of risk it, frequently impacts the pricing (or interest rate and fee’s) of a loan. Lenders are typically looking to prove two things with income documentation, an existing steady stream of income, and a history of stability for that income. For instance, a pay-stub would show that the income exists, and a w2 (or tax returns) would demonstrate the stability of that income.