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Mortgage lenders tend to require extensive documentation. It isn't uncommon for mortgage application files to balloon to more than 100 pages in length by the time all of the requested documentation has been received.
With that in mind, here's a quick guide to the types of documentation you might need to produce when you're applying for a home loan. Note that this is not an exhaustive list, and not every item will apply to every borrower.
Before you start shopping for a new home, it's a smart idea to get a mortgage pre-approval. Getting pre-approved lets you know what size mortgage you can obtain. It also lets sellers know you're a serious buyer.
A pre-approval involves going through the parts of the mortgage approval process that look into your personal qualifications. For example, the lender will verify your employment and income.
Lenders want to know what size mortgage you can afford. To calculate this, they look at something called your debt-to-income ratio (DTI ratio). Your DTI ratio simply compares your current debt with your current income.
For this, your lender will need to see documentation of your income.
For starters, most mortgage lenders want to see your last two years' tax returns. If you haven't yet filed a tax return for the most recent calendar year, your lender might request that you do so before applying. And if you live in a state with an income tax, the lender will likely want to see both your federal and state returns.
If you are an employee, your lender will want to see your two most recent W-2 forms.
If you are self-employed, the lender will need your two most recent 1099s and may also request additional income documentation.
Note: General mortgage documentation requirements are more extensive for self-employed applicants. Get more details in our step-by-step guide to getting a mortgage while self-employed.
Employees should be prepared to submit (at a minimum) their two most recent payroll stubs. This can be an especially important piece of documentation if your income has changed significantly since submitting your most recent tax return.
If you have income from other sources that you would like to have considered by the lender, such as rental income or Social Security income, be prepared to show documents (in addition to your tax return) that verify them.
Lenders also want to know about your current assets: their value, where they're located, where they came from, etc. Here are some of the documents you may be asked to provide.
Lenders will typically request two months' worth of statements for any checking or savings accounts you have. Be prepared to write brief explanation letters for any unusual deposits, bounced checks, or anything other than standard transactions.
When I applied for my first mortgage, I was renting a condo with a roommate. My roommate gave me cash to cover his share of the rent each month. My lender requested that I (and my roommate) sign a statement confirming the source of these recurring $700 cash deposits.
Just like with your bank accounts, you'll need to produce two months' worth of statements for every investment or brokerage account you have, including retirement accounts. If you only receive quarterly statements for certain accounts, your most recent statement should be sufficient.
Lenders have very specific rules about where the funds for your down payment and closing costs can come from. Most lenders allow for down payment gifts but don't allow you to borrow the money from a relative or friend.
So, if you're receiving some of your down payment from another individual, they'll need to sign a letter confirming the funds are indeed a gift with no expectation of repayment.
If you have other assets that could help you qualify for the mortgage or that you plan to use toward the down payment, be prepared to document them and their current market value.
For example, if you own a rental property, submitting proof of ownership and a recent appraisal could be sufficient.
Understandably, your lender wants proof you'll follow through with on-time monthly mortgage payments. To verify this, they might ask about your current mortgage (or ask for your landlord's information, if you're a renter).
If you own a home and currently have a mortgage balance, you'll likely need to submit your most recent statement showing how much you still owe on the home. This is especially true if you'd like the ability to close on your new home before you sell the old one.
If you're currently a renter, you'll need to provide contact information for your landlord, as well as documentation (such as canceled checks) showing that you've paid rent.
Finally, your lender will need to verify your identity and run a credit check. The credit check will play a part in determining your mortgage interest rate, among other things. There are a couple of types of documentation you may need to bring to your lender for this step.
In order to run a credit check, the lender will need your Social Security number. Every lender I've dealt with has requested a copy of my actual Social Security card.
Expect your lender to request a copy of your driver's license or other photo ID (such as a U.S. passport) as part of the application process.
As a final thought, it's important to mention that just because your lender doesn't request a certain document initially doesn't mean that they won't need it at some other point throughout the process.
For example, if your lender goes through your bank statements and sees an unexplained cash deposit, you may need to submit a letter explaining the details. And there are some documents that you're likely to need when your closing date approaches, such as documentation of an insurance policy on the property.
The bottom line is that there is a lot of documentation your mortgage lender might request, both before your application and while you're waiting to close. By preparing your documentation ahead of time, you can help ensure that the process will go as quickly and smoothly as possible.
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