So you’ve decided to take the big step of purchasing a home and like most of us you need to get a mortgage. Before you hit the big, flashy “Apply Now” button, take a few moments to get the documents that you will need all set. There is a lot of information that you will simply have to approve for the lender to get on its own, but there are still a few important documents you will need to provide up front when you apply for your mortgage. Read on to learn about these necessary documents so you will be fully prepared when applying for a mortgage.
First, before the lender can decide if you are responsible enough to lend to, they will need to verify that you are YOU. Hopefully your state issued driver's license is easy to find, it should be right in your wallet! This step is to safeguard your identity and prevent cases of identity theft.
Paystubs & W-2s
Next, the lender will want to verify your income. This can be done in a couple of ways, so be prepared to provide both paystubs and W-2s, although the lender may ask for one or the other. Keep in mind that this process is to ensure the lender that you will be able to repay the loan, so you will have to prove your income, assets and debts.
Some mortgage lenders may also ask for you to provide copies of previous tax returns. This shows your income and other aspects of your personal finances that may be helpful to understanding you as an applicant. You may be asked for the past 1-2 years of tax returns so you should have those easily accessible. If you are self-employed, this will be how you prove your income rather than paystubs or W-2s.
Some lenders may require that you link your bank accounts online through their website so they can see any changes in your accounts. They may ask for bank statements as well for the past few months. If the mortgage lender does not link to your bank accounts, you will be required to provide bank statements the day before closing as well to ensure you have the funds for closing.
Proof of Assets
In order to show the other assets you possess, you will be asked to list all assets, such as other properties and retirement accounts. Be prepared to show statements for investment accounts and proof of ownership of any properties or land you own. You may be required to show a statement of your investment or retirement accounts later on in the process as well.
Statements of Credit Accounts
Mortgage lenders need the big picture of your credit, so you’ll have to provide information for every credit account you have. This includes other mortgage loans, auto loans, student loans, personal loans, credit cards and retail cards. If possible, you should pay off all credit cards prior to applying for a mortgage and avoid any charges until after closing. Although this will most likely not improve your credit score in such a short period of time, it will look better from the mortgage lender’s perspective and improve your debt-to-income ratio.
Finally, if you are receiving money from family or friends, that will not need to be repaid, in order to help with the down payment or any associated loan costs, you will have to clearly document these as "gifts." You will have to check with your lender to see what the minimum gift amount is to require a gift letter as it varies by lender. Gift letters must include who the gift is from, your relationship to them, the amount, that it does not need to be repaid, that it is to purchase a home, when it will be transferred and signatures of the senders and you. When the money is deposited to your account you will also have to show proof of the transaction from both sides.
If you’re not sure if you will be approved for a mortgage, learn more about the requirements to get approved for a mortgage. It’s best to educate yourself about the different aspects of being approved for a mortgage before hand so you are not caught off guard and unprepared.
Download our Checklist of Documents Needed To Apply For A Mortgage to have a quick and easy guide to help you get prepared. Here’s a preview of the document:
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