Nationwide Mortgage Licensing System (NMLS) Practice Exam

Which document is typically required from a salaried employee to obtain a loan?

1. 90 day pay stubs

2. 2 years W2's

3. Profit and Loss statement

4. Balance sheet

The correct answer is: 2 years W2's

A salaried employee typically needs to provide two years of W2 forms when applying for a loan. This documentation is crucial for lenders because it allows them to assess the borrower's income stability and capacity to repay the loan. W2s serve as standardized evidence of an individual's earnings from their employer, summarizing total wages earned and taxes withheld over the specified years. By reviewing two years of W2 forms, lenders can gauge whether the borrower's income is consistent, which is particularly important for salaried employees who may have a regular paycheck. This helps ensure that the borrower meets the lender’s criteria for income verification and provides a clearer picture of their financial health. While pay stubs might be relevant, they typically show only recent earnings and are often used in conjunction with W2s for a comprehensive view of the borrower’s income. Profit and loss statements and balance sheets are generally more applicable for self-employed individuals or businesses, as they represent different forms of income verification that aren't appropriate for salaried employees.