What Documents Do You Need When Applying for a Mortgage?
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What documents do you need when applying for a mortgage?
Before meeting with a mortgage lender and starting the home buying process, it’s important to understand the documents needed for a home loan or mortgage pre-approval.
Getting a home loan involves a lot of paperwork, so be prepared to dig deep into your personal files to prove that you can afford a property.
Here’s a look at a few documents you’ll likely need when buying a home and applying for a home loan?
1. Tax Returns
Income stability is crucial when applying for a mortgage loan. It isn’t enough to be employed. You must prove that your income is consistent, and that it will remain consistent for the foreseeable future. Be prepared to submit copies of your tax returns from the previous two years.
2. Profit and Loss Statement or Recent Paychecks
Even though submitting tax returns from the previous two years starts the process, mortgage lenders must confirm that you’re still employed or earning money.
Therefore, you’ll also need to provide your most recent paycheck stubs. Depending on the bank, the underwriter might also request an employment/income verification letter from your employer.
If you’re self-employed, you might be asked to submit a year-to-date Profit and Loss statement as proof of current earnings.
3. Financial/Bank Statements
This might come as a surprise, but underwriters also need to see copies of your most recent bank account statements and investment account statements.
Buying a home is an expensive transaction because you’re also responsible for a down payment and your closing costs. For this reason, lenders need to see copies of your financial statements to determine whether you have enough cash in reserves for these expenses. If you don’t have enough assets, you might not be able to purchase the property.
Typically, you’ll need to show statements for the last 60 to 90 days.
4. Gift Letter
If you don’t have enough of your own funds for mortgage-related expenses, many lenders allow applicants to use gift funds for their down payment and closing costs.
Funds must come from a relative or another approved donor, such as a godparent. The rules regarding gift funds vary by lender and mortgage program, so speak with your loan officer for information on acceptable donors, as well as information on gift limits.
If you’re using a gift, the donor must provide a gift letter explaining that funds are a gift, and not a loan. In other words, the donor doesn’t expect repayment. As a general rule of thumb, you can’t borrow funds for a home purchase.
5. Rental History
Underwriters don’t typically require a copy of your rental history, unless you have a short credit history.
Never missing a rent payment builds a lender’s confidence and helps you get approved for a home loan—especially if your rent is comparable to what you’ll pay for the mortgage.
6. Credit Report
Submitting a mortgage loan application gives the mortgage lender authorization to check your credit report. They’ll review your credit history to see if you’re eligible for a loan. Your credit report also reveals information about your current debts, which helps the lender assess affordability.
Typically, you need a minimum credit score of 620 for a conventional home loan, and 580 for an FHA home loan. VA and USDA loan programs don’t set a minimum, but many lenders require a minimum score between 580 and 660.
7. Court Orders
If you receive alimony or child support – and want to include these payments for qualifying purposes – lenders will need to see a copy of your divorce decree or a court order for child support. To use this income, you must receive support payments for at least six months before applying for the loan. In addition, support payments must continue for at least three years after closing.
8. Identification
To prevent mortgage fraud, be prepared to provide a copy of your drivers license (or other approved government ID) and your Social Security card. This is how the lender confirms your identity.