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- Lenders need to look at your income, assets, credit, and debt before qualifying you for a mortgage.
- Be prepared to provide pay stubs, W-2s, tax returns, bank statements, and any other documentation proving you have the ability to repay the loan.
- Having your documents ready ahead of time can help the process go more smoothly.
Getting a mortgage requires a lot of documentation. To ensure that you can afford to pay back the money you're borrowing, your mortgage lender will go through your financial history with a fine-tooth comb.
This means you'll be asked to provide a lot of proof that you have sufficient income, credit, and assets to qualify for a loan. Having all these documents ready to go ahead of time can help make this process go more smoothly.
"Although the process of submitting paperwork to process your loan can feel laborious in today's fast-moving, competitive homebuying market, the documentation you submit for the underwriting process can have a major impact on how long it takes to process your loan," says Michael Innis-Thompson, Head of Community Lending and Development at TD Bank.
In a market where sellers often receive multiple offers, being prepared and responding quickly when your lender requests documentation can give you a competitive edge, Innis-Thompson says.
"The most prepared buyers – those who have their paperwork in order and can enter a contract with ease – are most attractive to sellers," he adds.
Basic personal information
To start, you'll need to provide your lender with proof of your basic personal information. This includes:
Government-issued ID
To confirm that you are who you say you are, your lender may ask for some form of identification, such as a driver's license or state ID.
Social Security Number
If you have a Social Security Number, you'll need to provide this, too. If you don't have an SSN, you may be able to get a loan with an ITIN — an Individual Taxpayer Identification Number issued by the IRS.
Proof of income
The exact income documents your lender will request depends on your situation. Self-employed borrowers, for example, will need to provide different documentation than someone who receives a W-2 as a full-time employee.
You may not have to dig up all these documents yourself. Some lenders have technology that can pull certain information on your behalf.
Here's a list of some of the most common income-related items mortgage lenders will ask for. If you're borrowing with someone else, such as your spouse, remember that you'll both need to provide these things.
Recent pay stubs
Lenders want to see that you have a steady and predictable source of income. To prove this, they will typically want at least the last month of pay stubs for both you and your spouse or co-borrower.
W-2 forms and tax returns from the past 2-3 years
If you work a salaried job, your lender will want copies of your W-2 forms for the last two to three years, as well as copies of your tax returns, which show the total income made for your household during those periods.
If you're a freelancer or contractor, you likely won't have W-2s. Instead, you can submit 1099s or, if you're a business owner or self-employed, a profit and loss statement for your company. Your lender will likely request bank statements, too.
Proof of additional income (e.g., alimony, bonuses, etc.)
You'll need to submit proof of any additional income you receive regularly as well. This might include alimony, child support payments, or Social Security income, for example. You can use your Social Security award letter or your legal agreement/court decree as proof for these items.
Employment verification
Lenders don't want to just see that you have money now — but feel confident you will have the funds to make your payments for the long haul, too. Because of this, they will want the following.
Contact information for employers
You'll need to provide the name, address, and phone number for your employer and the employer of anyone else on the loan. They will contact these organizations to verify you're actually employed by them.
Employment history
You will also need to detail your past employment, along with dates, company names, and other details. This shows the lender that you have been steadily employed — with stable income — for a while and will likely remain that way for the long haul.
Credit information
Your lender will look into your credit history to gauge how well you manage debt. To do this, they'll need:
Permission for a credit check
The lender will pull your credit report and score and evaluate your repayment history. They will also look at how much debt you have and your current balances. These credit checks typically come with a small fee you'll pay at closing.
Explanation of credit history issues, if any
If there are any blemishes on your credit report, you can explain these in a letter and submit it to your lender. For example, if your high credit card balance isn't due to bad spending habits but instead, a scammer who stole your credit card number, you might want to explain this to your lender so it won't impact your mortgage chances.
Proof of assets
Your lender will need to see proof of any money you have access to, as this impacts what they'll be willing to loan you and how much monthly payment you can afford. You'll usually need to provide:
Bank statements
You will need to hand over at least two months of bank statements for both your checking and savings accounts. This helps the lender gauge your financial habits and ensure you'll be able to comfortably make your payments moving forward.
They will also want to see that you have enough saved for your expected down payment and closing costs.
Investment account statements
You'll also need to give the lender statements for any investments or brokerage accounts you have. While you might not be using the money in these accounts to make your monthly payments, they do show the lender what you have in reserves — the funds you can pull from if you fall on hard times down the road.
Retirement account statements
Retirement accounts offer a similar kind of financial backup, so lenders will want to see proof of these, too. This should include statements for any 401(k)s, IRAs, or other accounts you may have.
Debt information
Mortgage approval doesn't just hinge on how much money you have in your bank, or how much you earn each month; how much money you're spending each month on debts and other obligations also plays a major role in your ability to qualify for a mortgage.
To gauge this, lenders will need info on your:
Outstanding debts (credit cards, auto loans, etc.)
Lenders can gather a lot of this information by looking at your credit report, but you may need to provide additional documentation regarding certain ones. This might include your most recent monthly statement or a copy of an outstanding invoice.
Monthly debt obligations
If you have any monthly debt obligations, such as alimony or child support you're required to pay, you'll need to provide proof of these as well. A copy of the court decree or legal agreement will usually work in these scenarios.
Property information
Lenders also need to know about the property before they'll agree to loan you money for it. They'll need the following items:
Sales contract
Once you've made an offer on a house and the seller has accepted, your real estate agent will draw up a sales contract with the details of your deal. You'll need to give this to your lender, so they can approve the loan amount and closing date.
Property listing details (if applicable)
If the home was listed on a public listing site, send your lender these details, too. They and the appraiser can use them to determine the home's value and ensure it's worth what you're borrowing for it.
Additional documents
Your lender may need additional documents, depending on your specific situation. They may request:
Divorce decrees, bankruptcy filings, etc. (if applicable)
You'll need to provide documentation of any official court filings or decisions that impact your finances. This can include divorce, separation, child custody battles, bankruptcy filings, and more.
Rental history (for first-time buyers)
If you're currently a renter, your lender might want proof that you have a history of paying your rent on time. Be prepared to provide information about your rental history for the last year. This might include showing canceled rent checks.
FAQs
Yes, lenders typically require proof of homeowners insurance to protect their investment in the property.
Most lenders require financial documents, like bank statements and pay stubs, to be from the last two to three months to ensure they reflect your current financial situation.
Self-employed individuals need to provide additional documentation, including profit and loss statements and 1099 forms, to verify income stability.
Yes, you can use gifted funds as part of a down payment, but you'll need a gift letter from the donor stating that the funds are a gift and not a loan.
The sales contract outlines the agreed-upon price and conditions of the sale. It's a critical document that the lender needs to finalize the loan amount and terms.
