What financial document must be obtained by lenders for verification of income from certain sources?

Tax returns are the financial documents that lenders must obtain for verification of income from certain sources. They provide a comprehensive view of a borrower's income over an extended period, typically the most recent two years, which is essential for accurate assessment. Tax returns offer detailed information regarding overall income, including wages, freelance earnings, dividends, interest, and other sources of income that may not be captured on shorter-term documents like pay stubs or bank statements. This is particularly important for self-employed individuals or those with variable income, as it provides a more accurate picture of their financial situation and helps lenders underwrite the loan properly in accordance with regulatory requirements.

Bank statements and pay stubs can offer snapshots of current income and account activity but lack the broader context that tax returns provide. Credit reports primarily contain information about the borrower's credit history and do not directly verify income, making tax returns the necessary document for this purpose.