Getting pre-approved for a mortgage is a smart step before you start looking for a home . A pre-approval letter shows the seller that you have proven to the lender that you have the income and down payment needed to qualify for a mortgage . This can make sellers take you seriously, especially in the hot sellers’ market. Pre-approval can be quick and easy if you have the right documents ready. While the documents required by each lender may vary slightly, almost all lenders require at least 4 documents.
- Income and Employment Documents – All lenders want to see that you are currently employed and also proof of income to decide how much home you can afford . To document your income, lenders typically want copies of your tax returns for the past two years. To prove employment (and income) for mortgage pre-approval, lenders require W-2 forms. Recent pay stubs may also be required . End-of-year pay stubs may be required if your annual income includes bonuses or overtime. For self-employed individuals, 1099 forms can be used. If you receive income from a rental property and want it to count toward qualifying for a mortgage, you will need to provide documentation of rental income and the current market value of the property .
- Asset Documents – Lenders will want to see if you have cash for a down payment, as well as reserves for future mortgage payments. You’ll need to provide bank statements for the past two months, as well as statements from any investment accounts you have, including IRAs, 401(k)s, and stock and bond accounts.
- Debt Documents – Mortgage lenders look for low debt-to-income ratios, so you’ll need to provide documentation of any debt you have. Common types include student loans, auto loans, credit cards, and other home loans. Your documentation should provide the names and addresses of lenders, the loan balance, and the minimum payment required.
- Exception and Special Circumstances Documents – There are many situations where you need to have something explained about your finances. Include documentation about any of these to help in the pre-approval process. These could include documents about previous bankruptcies or foreclosures, gift letters for down payment if you receive some or all of the down payment from someone else, divorce documents that list alimony or child support you receive or pay. For first-time homebuyers, rental documents may be required, such as proof of last year’s rent payments.
Gathering all the necessary documents can often be done in just a few days, and the pre-approval process can also be completed in just a few days. Once lenders have the necessary documents, they will review them and check your credit, and hopefully send you out into the real estate market with the pre-approval you need to make an offer on the perfect home.
To get pre-approved for a mortgage, you’ll typically need to provide a number of documents that verify your identity, income, credit history, and other relevant financial aspects. Here are four common documents that are typically required to get a mortgage pre-approval:
- Proof of Income : This can include your recent pay stubs, W-2 or 1099 forms for the last two years, completed federal tax returns for the last two years, and any other forms of regular income such as rental income, bonuses, commissions, etc. Self-employed individuals may need to provide business tax returns and profit and loss statements.
- Bank Statements : Lenders will want to see recent bank statements showing your available liquid assets, including checking, savings, investments, and any other relevant assets. This helps determine if you have sufficient funds for your down payment, closing costs , and emergency reserves.
- Employment Information and Work History : You may need to provide details about your current employment, including the employer’s name and address, length of employment, and your job title. Lenders may contact your employer to verify your current employment and salary.
