When real estate investors go through the sometimes tedious process of obtaining financing for a new rental or even refinancing an existing mortgage they often wonder why the lender has such as a fixation on the number “two” because the loan officer uses the term quite frequently.

And even if it’s beenlenders and the number two some time since you’ve worked with a loan officer when financing a rental, it’s likely today’s post will ring a bell or two. Why does a lender like “two?”

The very start of documenting a mortgage loan means reviewing a list of items to be collected given to you by the loan officer and one of the first items to be provided is your “two” most recent W2 forms. Why two years? Lenders need to establish the borrower can show evidence of consistent, year to year income. If last year showed income of $75,000 yet the previous year’s W2 had $150,000 on the form, the lender might be concerned due to the sudden decrease in income. Consistency helps lenders stay calm.

On the application you’ll notice right beneath your name is the place to put your street address but it also asks for “two” years of addresses. If you’ve only lived in your current property for 20 months, you need to enter the previous address as well.

Lenders want to know where you’ve worked for the previous “two” years and that you have been fully employed for that time. That is shown by your two most recent W2 forms. If you’re self-employed, you’re asked for two years of federal income tax returns. If you need to use interest and dividend income to help qualify you need to have a two year history of consistent income. Part time income? Bonus? You guessed it. Lenders want to see a two year history before it can be used.