Receiving mortgage pre-approval is an essential step when looking to purchase a home. It demonstrates your seriousness about the deal and that you are an eligible borrower.
Additionally, mortgage preapproval provides you with an indication of how much home you can afford – making your offer more likely to be accepted. But before beginning the process, what documents do you need for mortgage pre-approval?
Credit History: Your credit report is one of the most essential documents lenders require. They use it to decide if you qualify for the loan and what interest rate will be charged.
Pay Stubs: Lenders want to verify that you have a reliable job and the resources to cover your monthly payments. Typically, they request your most recent pay stubs, which can be either printed or digital copies.
Bank Statements: Your lender will review your bank statements to confirm you have enough funds for a down payment and other necessary expenses. They also look for any red flags, such as bounced checks, insufficient funds, unstable income or large deposits from unknown sources.
Tax Returns: Your most recent tax returns may be requested by a lender. These documents show how much income you have made, what deductions you claim and whether or not there are any derogatory marks on your record.
Investment Accounts: Your lender will require proof of your investments as well. This could include statements for your 401(k), 403(b), IRA, bonds, mutual funds and stocks.
Other Assets: Your lender is likely to request additional documentation regarding your investment portfolio and other valuables, such as jewelry and collectibles. It’s wise to get this information together beforehand so it can be provided quickly.
Letter of Explanation: If there are any discrepancies on your credit report that cause concern for your lender, they would appreciate hearing from you. This helps them get a complete overview of your finances and can prevent identity theft.
Personal Identification: Your lender will require several pieces of personal identification to confirm your identity. These could include a driver’s license, passport or state-issued ID card.
Additionally, you may provide a utility bill, car insurance policy or credit card statement as proof of debt-to-income ratio. These documents are essential in determining your situation.
Your credit history and employment status are two important components of the mortgage approval process. They can indicate whether or not you have significant debts such as credit card balances or student loans, plus whether or not you’ve ever filed for bankruptcy in the past.
The income verification stage of mortgage approval is another critical component. Although this can be a time-consuming and laborious endeavor, having all necessary documents ready for your lender is paramount to getting approved.
Self-employed individuals typically need a tax return and W-2s. Independent contractors or freelancers also must submit Form 1099s along with other income reporting documents.