The Complete Checklist: What You Need for Mortgage Pre-Approval

If you’re eager to buy a home, the first step is to get pre-approved for a mortgage. While it might seem overwhelming, being prepared can help you when searching for your dream home.

For pre-approval, you’ll need to gather specific documents. Let’s break down the essential paperwork required for pre-approval and how to get everything in order. It’s time to get organized and prepare to make your homeownership dreams a reality!

 

Pre-Approval Income Documents

Proving Your Income and Employment When applying for a mortgage, your ability to repay the loan is a crucial factor for lenders. To demonstrate this, you’ll need to provide documentation of your income and employment, proving you have a reliable source of funds. Here are the key documents you’ll typically need to provide:

1. W-2 Forms: These forms display your earnings and taxes paid for the year, helping lenders assess your income history and stability. Two years’ worth of W-2 forms are required. If you have multiple jobs or are self-employed, expect additional paperwork like profit and loss statements.
2. Pay Stubs: Your pay stubs show your gross income, net income, and deductions. You should provide at least two months’ worth of pay stubs to confirm your current income and employment status. If your income varies or you work part-time, extra documentation might be needed.
3. Employment Verification: This is a letter from your employer confirming your job title, employment duration, and salary or hourly rate. It assists lenders in verifying your income and job stability.
4. Tax Returns: Your tax returns provide a comprehensive view of your income, deductions, and any self-employment earnings. You’ll need to submit the last two years of tax returns. Lenders might also use these to verify your income and expenses.
5. Additional Income Documentation: If you have other income sources like rental income, child support, or alimony, you might need to provide extra documentation to support these earnings. For instance, a lease agreement for rental income or court documents for child support or alimony.

 

Pre-Approval: Asset Documents

Documenting Your Assets Lenders usually require documentation of your assets to evaluate your financial situation and ability to make a down payment. Here’s an overview of the documents you may need to provide:

 

1. Bank Statements: These statements show your account balances, transactions, and financial activity. You’ll need to provide at least two months’ worth of bank statements for all your accounts. Lenders use them to verify your income, monitor your spending, and look for any red flags.
2. Investment Statements: If you have investment accounts like stocks, bonds, or mutual funds, you might need to provide statements showing your holdings and account balances. Lenders use these to assess your financial stability, diversification, and down payment ability.
3. Retirement Account Statements: If you have retirement accounts like a 401(k) or IRA, you might need to provide statements displaying your account balances. Lenders use these to assess your overall financial health, stability, and down payment capability.
4. Other Asset Documentation: If you have additional assets like real estate, vehicles, or valuable personal property, you may need to provide documents to verify their value. For example, a property appraisal for real estate or a vehicle registration for a car.

 

Pre-Approvals: Debt Documents

Providing Debt Documentation In addition to income and assets, lenders need documentation related to your debts to evaluate your creditworthiness and ability to make monthly mortgage payments. Here are some of the documents you might need to provide:

 

1. Credit Reports: Your credit report shows your credit history and current financial situation. Lenders request a credit report from major credit reporting agencies. It displays your credit score, outstanding debts, and payment history.
2. Credit Card Statements: Credit card statements detail your outstanding balance, minimum payment, and other charges. You usually need to provide two months’ worth of credit card statements. Lenders use them to assess your debt-to-income ratio and overall debt load.
3. Loan Statements: These show your outstanding balance, monthly payment, and other loan terms. You’ll need to provide statements for all your outstanding loans like car loans, student loans, and personal loans. Lenders use them to evaluate your debt-to-income ratio and overall debt.
4. Other Debt Documentation: If you have other types of debt like medical bills, child support payments, or tax liens, you might need to provide documentation to confirm this debt. For instance, a payment plan agreement for medical bills or court documents for child support payments.

 

Other Documents

Additional Documentation In addition to the categories mentioned earlier, more documentation might be needed for mortgage pre-approval. Here are some additional documents you may need to provide:

1. Identification Documents: You typically need government-issued identification like a driver’s license, passport, or social security card. These documents help verify your identity and prevent fraud.
2. Purchase Contract: If you’ve already found a home and are seeking pre-approval, you might need to provide a purchase contract or agreement. This document outlines the terms of the home purchase, including the purchase price, closing date, and other details.

 

Last words

To increase your chances of pre-approval and make the home-buying process smoother, begin preparing for your mortgage. Collect essential documents like proof of income, employment verification, credit reports, credit card statements, loan statements, and asset validation.

Gather everything you need before applying for your mortgage. Delays can significantly postpone the mortgage approval process, so getting organized ahead of time is crucial. With everything in order, you’ll be on your way to owning your dream home in no time!