What Documents Do I Need To Apply For A Mortgage?

Understanding Mortgage Preapproval

Before gathering mortgage documents that are needed for preapproval, it helps to understand the mortgage preapproval process and why it’s important.

Mortgage preapproval describes the process through which financial lenders determine if they are willing to loan you money to purchase a new home. As part of this process, your lender will also decide how much money they’re willing to lend you, and any conditions under which the loan will be extended. Preapproval depends on a variety of different factors such as your income, credit score, assets and debt level.

Filing the documents needed to obtain a mortgage loan application and securing preapproval is extremely helpful, as it lets you know how much money a lender is willing to extend to you. That not only helps you get a better sense of how much money you can afford, but also can provide sellers with greater peace of mind, as it indicates to them that you are serious about the offer and have the means to close on the purchase.

For these reasons, it’s important to get preapproved prior to beginning the process of house hunting. It can help you narrow down your search and improve your odds of securing your dream home.

6 Documents Needed For A Mortgage

Lenders will wish to see certain mortgage documents along with your application. This information helps provide potential lenders with a snapshot of your financial health and gives financial institutions a sense of your general creditworthiness. Keep in mind that the below list speaks to many of the most commonly requested information that borrowers must submit. However, some lenders will ask for additional documentation, such as in the case of a borrower who is applying for a VA loan.

1. Personal Identification

With fraud and identity theft on the rise, lenders will want to ensure that you are who you say you are – and that any information that you submit accurately reflects your personal finances. To this extent, financial providers will ask to see identifying information, which will also be used to perform a credit check, such as your:

• Driver’s license
• State-issued ID
• Passport
• U.S. alien registration card
• Social Security card

2. Proof Of Income

Just as important to a financial lender as knowing who you are is knowing whether you can afford the mortgage loan. That means having to supply certain employment- and income-related records. These may vary depending on if you’re a full-time, part-time, or freelance worker, and/or own your own business. Common forms of income documentation include but are not limited to:

• Pay stubs: A lender will wish to see copies of a few of your most recent pay stubs. Supplying them helps verify your employment, employer and current income levels.
• Bank statements: You’ll typically be asked to supply 2 – 3 months’ worth of bank statements as part of your mortgage documents as well. This provides insight into savings and spending habits.
• W-2s: If you’re a full-time employee, it’s common for lenders to ask for 2 years’ worth of W-2 forms. Again, this serves to verify employment and income levels.
• 1099s: If you’re a freelancer or contractor, lenders may ask for 2-3 years’ worth of 1099 statements to get a better understanding of your income.
• Audited profit and loss statements for the self-employed: If you own a business, you’ll often be asked to disclose these details as well. Looking at them helps provide lenders with a general sense of the relative health of the business.
• Tax returns: You may also be asked to supply 2 – 3 years’ worth of tax returns so as to establish income and earnings too. If you’re self-employed, it’s not uncommon for these earnings to be averaged to arrive at a generalized income figure.

3. Proof Of Assets

Lenders may also look at other sources of earnings or money in addition to your income from employment.

Liquid Assets

The term “liquid assets” refers to items that can easily be liquidated and converted over into cash – for example, money that you may currently have in your checking and savings accounts. By looking at your bank statements, a lender can see proof of such assets. Sample forms of liquid assets might include your:

• Checking account
• Savings account
• Stocks
• Bonds

Non-Liquid Assets

On the flip side, non-liquid assets are valuable items that are harder to liquidate and turn into cash, generally because they need to be sold. Items that are often considered to be non-liquid assets are: 

• Real estate
• Cars
• Jewelry
• Artwork
• Collectibles

4. Monthly Debt Statements

Mortgage lenders want to know that you can afford potential loan payments. A debt-to-income ratio (DTI) that is too high often serves as an indicator that you may find it difficult to juggle all your debts or struggle to make your monthly mortgage payment.

As part of your documents for mortgage preapproval, you’ll need to prepare and submit documents pertaining to your fixed debts. Fixed debts are recurring minimum payments on other outstanding loans in your possession. For instance:

• Current mortgage statements, if purchase is of an investment property
• Student loan statements
• Auto loan statements
• Credit card statements
• Medical bills
• Personal loan statements

Although routine monthly expenses such as groceries, utilities, fuel, entertainment, and dining out aren’t included in your monthly expenses and DTI ratio, you’re still going to want to keep these costs top of mind as you think about budgeting for your new home and considering how much that you can afford for a monthly mortgage payment.

5. Credit Report

Your credit report provides lenders with a snapshot of your financial health. It’s a pivotal lens through which financial institutions determine if you’re a risky borrower, which is why lenders need a borrower’s credit report. Prior to submitting your mortgage application, you’ll want to thoroughly review your credit report and dispute any errors.

6. Rental History And Landlord References

You may be asked for a copy of your rental agreement with your current landlord if you’re a renter. That’s because a mortgage provider will want to know what your fixed housing costs are monthly (which can impact your DTI ratio as a recurring source of debt). They’ll also want to know if you have a history of timely and responsible payment. Noting that rental costs can impact DTI, which can in turn impact your interest rate, monthly payment, and loan terms and conditions, you may wish to consult this handy Rent Vs. Buy Calculator from our friends at Rocket Mortgage® before applying for a loan.