Documents Needed for Mortgage Application: mortgage checklist

First, I’ll describe all the documents needed for mortgage application. Second, I’ll provide a Mortgage Checklist that can be used as a reminder of what is needed to get the mortgage application completed fast and easy.

A mortgage is one of the most critical financial decisions you will make. You will need to submit many documents to a lender to get a mortgage. The Mortgage Checklist includes things like proof of income, your debts, income tax return, a current bank statement, copies of your credit report, and even more information. In addition to this, you’ll need to show that you have a valid reason for buying a home. Such as, owner occupied vs rental properties.

Woman sitting at a table using a computer to submit documents needed for mortgage application.

Home loans are a huge decision. So, it pays to carefully research your options. Different situations require different types of paperwork. It’s worth finding out exactly what information lenders need to approve your loan, and you’ll be sure you don’t miss anything important.

Having the proper documents ready can help you complete the transaction faster. That’s why it’s a smart idea to be prepared and pre-organize all the documents you need for a mortgage application.

In this article, we are going to talk about the Mortgage Checklists you will need to prove that you can afford a mortgage.

Key Takeaways from: Documents Needed for Mortgage Application

  • Mortgage lenders look at a variety of factors when they decide whether or not to give you a loan and may ask for documents from you in order to do that. The Consumer Financial Protection Bureau (CFPB) and other government agencies set those requirements.
  • In most states in America, you must prove your identity, income, assets, rental property history, and debt payments to qualify for loans from private lenders.
  • To make the documentation simpler and less complicated for the mortgage lender, you’ll need to include extra documents.
  • Your lender requires updated copies of certain documents, like bankruptcy, divorce, gift funds. It may be wise to have them before you apply for the loan to make the loan closing faster.

Mortgage Documents Application Information

You will need to complete a standardized loan application to apply for a mortgage. This is the form lenders use to determine whether you are eligible for a mortgage. You have to answer questions about your income, expenses, and debts.

Income Verification

Lenders ask you to provide some evidence to prove that you can repay the money you want to borrow. Lenders look for borrowers with stable incomes to qualify for a mortgage. It’s always important to be truthful when filling out forms and loan applications. The lender will want to make sure that the borrower can afford the monthly mortgage payment.

The following documents are what you need to show as income proof:

W-2 Forms

It’s a good idea to submit W-2 forms. So, you should make a list of all your employers over the last two years and get copies of them. You need to get copies of the documents you filed with your employers. You might also want to check with your employer or with the IRS to ensure you comply with all the requirements of filing and reporting tax returns.

W-2 Wage & Tax Statement

Pay Stubs

To qualify for a mortgage loan, lenders typically ask for pay stubs and other forms of proof of income. You may need to provide PayStubs and any other documents that demonstrate how much you earn. If you receive different types of payments that are not recorded on your pay stub, you will need to find documentation for these payments. You can get proof of your income from the W-2 form or pay stub. However, during the loan process you will need to provide proof of recent pay stubs or recent bank statements showing direct deposits of income.

Tax statement document

Income Tax Returns

A lender will usually require that you provide two or three years of prior tax returns. For independent contractors they may also ask to see current income tax documents. To get the loan, you may need to provide copies of IRS Form 4506-C, which allows the lender to obtain your tax information.

Alimony or Child Support Documents

If you are married, you should file for separate tax returns unless you and your spouse have reached an agreement regarding how much you are going to pay for child support. As for other forms of support, if you are divorced, the court can order you to file for a separate tax return.

Alimony and child support income records are needed for up to three years prior to the mortgage application date. You may submit a copy of the court order if you have one.

Documents for Self-Employed, Freelancers, and Independent Workers

Many lenders look at the length of time you’ve been self-employed, freelancers, and independent workers before you apply for a loan. You can provide your lender with documents proving that you have had steady, recent employment for at least two years. They can ask for your tax returns and other documentation showing you’ve been self-employed for an extended period.

Happy smiling woman has many more assets than debts.

Assets and Debts

Lenders will use your debt-to-income ratio to calculate your credit score. Your lender will want to see all your assets and debts to verify that you have the money to pay the mortgage and the additional costs associated with purchasing a house. If they feel you can’t afford the house you’re buying or don’t have the proper paperwork, they won’t give you the money.

You will list your monthly debt payments and monthly income. It’s better to have a monthly debt payment under 35% of your income.

Most lenders in the USA want to see these documents to determine your assets and debts:

Bank Statements

Your lender will look at your savings accounts to see if you can cover the down payment, and closing costs.. Oftentimes those costs can be included into the residential mortgage monthly payments. Also, lenders will consider the borrower’s financial health by checking their credit score and employment history. Also, business owners and self employed will need to provide a year to date profit and loss statement.

You will typically need to provide a list of the last three to four months of personal bank statements. So, be sure to have the most recent reports available when applying for a home loan.

If you have set up your account as a business, you will receive bank account statements in the mail. A home loan is a long-term loan that will be repaid over a while. Lenders want to know the source of your income. You may need to provide copies of your bank statements showing the source of any significant deposit.

Retirement and Investment Accounts:

Retirement accounts can be used to pay for closing costs. You must provide at least two to three months’ worth of statements from your retirement or investment accounts to cover a cash advance to close. You have to list all of your retirement and investment accounts, including 401(k)s, IRAs, and pension plans. You have to detail the value of these accounts and show how much money you have contributed to them.

Woman using a white smart phone to check her retirement account.

Down Payment Gift Letters Are Required If Using Gift Funds

If you have a relative who wants to help you finance your home purchase, you can also fill out a gift form, which will allow them to write a check for the down payment amount. They will need to sign a gift form (gift letter) stating the the money is truely a gift and not a loan. If the lender asks for copies of the donor’s bank statements, you will have to show that the money is indeed from a legitimate source.

A gift letter may not be needed if the gift was made several months before the mortgage process begins.

Credit Verification

When first applying for a mortgage, you may be asked to submit a copy of your credit report, or they will obtain a “soft” credit report themselves. Soft credit reports do not harm your credit scores. Actually, your lenders will ask your permission before officially checking your credit. That will occur as part of the loan approval process when a formal application is started.

The lender will check your credit report and credit references to ensure a reasonable loan risk. This is where your good credit history will help. However, if you want to get a lower interest rate, you need to ensure that your credit score is as high as possible. Your credit report will contain information on all of your credit accounts, including credit cards, loans, and mortgages.

Additional Mortgage Documents Needed

There are different types of mortgages available to you. Each lender has additional mortgage document requirements and other loan terms. You can also shop around for the best mortgage rates and loan terms. For example FHA loans require several documents that are not needed for conventional loans.

Signed Copy of the Purchase and Sale Agreement:

Copies of the signed purchase and sale agreement are generally required from the buyer and seller. The risk of forgery increases as the sale price increases, and so does the need for a lawyer’s assistance in completing the transaction.

Mortgage Application Information

You will need to complete a standardized loan application to apply for a mortgage. This is the form lenders use to determine whether you are eligible for a mortgage. You have to answer questions about your income, expenses, and debts.

Rental Payment History and References

Proof of payments for the last year and contact information for landlords for the previous two years are required if you have been renting.

Divorce Decree

You may have to pay child support or alimony after you and your ex-spouse split up. Lenders will find out whether you have to pay child support or alimony by looking at your divorce decree. I had been divorced for more than 20 years, and still needed to provide a copy of the divoce decree.

A Petition To File For Bankruptcy must be included in the documents needed for mortgage application.

Bankruptcy or Foreclosure Records

The time you have to wait to reenter the mortgage market depends on whether you have a bankruptcy on your credit history. Lenders may ask you to provide proof that your debts have been discharged. The sooner you show that you have discharged your debts, the better.

Foreclosures will prevent borrowers from obtaining new mortages for 2-7 years depending upon the type of loan.

ID for Noncitizens

Mortgage lenders may require you to be a U.S. citizen, but they will consider your immigration status or permanent residence, too.

They may ask about your visa status, green card, the status of your family members living with you, whether you have any pending criminal charges, and your employment status. The information you provide will determine whether you qualify for a mortgage loan. When you apply for a loan, your lender will want to verify that you have a reasonable expectation of earning sufficient income.

Alternative Data to Help a Bad Credit History and Credit Score

Lenders use credit scoring to determine whether to give you a loan. Lenders will look at credit histories and credit scores. Lenders may also use alternative data to score your credit. Credit scores can be enhanced with alternative data, such as utility payments, cellphone bills, rent payments, and other regular bill payments.

Young black woman sitting on the floor, leaning against a sofa and using a laptop computer to check the mortgage checklist

Take A Look: Mortgage Loan Document Checklist

You need to organize each file as you go through the checklist. Use a scanner to scan paper documents and use a computer or smartphone to create PDFs. It is always a good idea to copy your financial records in one place. Don’t hand over originals to your lender.

You need to organize each file as you go through the checklist. Use a scanner to scan paper documents and use a computer or smartphone to create PDFs. It is always a good idea to copy your financial records in one place. Don’t hand over originals to your lender.

A mortgage lender wants several mortgage checklists to make sure that you can afford to repay the loan before approving you for a mortgage. You may not qualify for a loan if you cannot meet the requirements. You will be asked to provide the following documents:

Mortgage Application Information

  • A state-issued identification card or current driver’s license and social security number
  • Mortgage details, including what kind of mortgage you want and how much you can afford.
  • The home information you want to purchase, including price and property features.
  • Borrower information includes the borrower’s name, loan amount, loan term, interest rate, monthly payment, total payment, repayment date, and the borrower’s contact information.
  • The last two years of employment information.
  • Household expenses and income per month
  • A list of your assets and liabilities.
  • You can use your e-signature to confirm that you agree with the information provided is correct.

Income Verification

  • W-2 form (at least two years)
  • A month’s worth of pay stubs.
  • You need to file one to three years of tax returns.
  • You will need a copy of the original IVES Request for Transcript of Tax Return, IRS Form 4506-C to file your application. Online lenders will provide this to you to complete online.
  • If you are self-employed, include personal income tax returns, profit and loss statements, and a list of business debts
  • Rental income, if any. A copy of the lease agreement might be required.

Assets and Debts

  • All of the accounts listed on the application need to have two to three months worth of statements.
  • Large deposits on the asset or bank statements need to be documented.

Credit Verification

  • Provide more documents explaining why these following documents are in your credit file and what has been done about them: late payments, collections, judgments, and other derogatory items on your credit reports
  • Bankruptcy and discharge documents.
  • If you have a thin credit file, include these documents to boost your chances of loan approval: include payment histories for utilities, cellphone, cable TV, car insurance, and other bills.

Conclusions From: Documents Needed for Mortgage Application and Mortgage Checklist

The documents required to get a mortgage are varied and often confusing. There are so many requirements that a prospective buyer may not even realize that they need to have all the right paperwork ready.

If you’re a first-time homebuyer, you need to ensure that you have everything in order before applying for a loan. However, if you’ve been a homeowner before, you may have an idea of what’s required.

Get prequalified for free and with very little personal information needed. Then if happy with the terms and conditions offered by the lender, formally apply for the mortgage. The lender will send you a list of the documents needed for mortgage application that can be filled out online. That’s where the home buying process checklist will be very useful.

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