Preparing to buy a home? Gathering the paperwork you'll need before you apply for a mortgage is a good idea. Finding some of these documents may take some time, so getting it done beforehand may speed up your application process. The article below describes what documents you should look for and why, but you can also download this printable checklist [link to download checklist].
Why Do They Need All of These Documents?
During the initial stages of applying for a mortgage, you'll fill out an application. The application will ask for your personal and financial details, so that the lender can begin to determine your eligibility for a mortgage. However, this mortgage application is completely self-reported and at this stage, none of the things you say are verifiable by the lender. That's why your lender will ask you for documentation to support your application. They're primarily looking to verify:
- Income and employment
- Assets and debts
- Credit history
- Identity
- Other relevant information like divorces, bankruptcies, or gift funds
Income & Employment verification
Your lender will request documentation to confirm that you can pay back what you're asking to borrow. Lenders typically look for stability and consistency in your income.
Here are some things you'll need to prove your income:
W-2 Forms - You'll probably need to provide W-2s from the last two years for each person listed on the application. You may have these in your personal records, with your tax returns, or you can check with your employer or ask the IRS for copies of the W-2s you submitted with your tax returns.
Pay stubs - You'll likely need to provide pay stubs from the last 30 days. If you receive other kinds of payments, such as commission or bonuses, you'll need to be able to produce documentation of these too.
Income tax returns - You'll need to produce your last 2-3 years of income tax returns. This is to establish that the income you reported and deductions you claimed are consistent with your employment history. Look for form 1040, which you submitted to the IRS.
Other types of income - If you have other types of consistent income, you may need to provide documentation for those as well. Some examples include:
- Alimony or child support documents
- Freelancers, self-employed workers, and independent contractors will need to provide proof that they've had steady work in the same industry for at least two years. Year-to-date profit and loss statement, current balance sheets, federal tax returns, and business license or proof of insurance are some commonly accepted forms of documentation.
- 1099 forms from the past two years
- Income from rental properties can be documented with copies of leases, property appraisal reports, and documentation of rental income.
- Those receiving income from retirement, social security, disability, etc. will need to provide copies of the award letter and most recent check.
Assets and Debts
When you complete your application, your lender will ask you to report all of your monthly debt payments. These might include auto loans, credit cards, student loans, other mortgages, etc. They'll also ask about your assets like bank and investment accounts. They use these to calculate your debt-to-income ratio (how much debt you are responsible for paying vs. what your income is), which helps them ensure that you'll be financially stable after paying upfront costs and can afford your monthly mortgage payment.Account Statements - past 2-3 months of statements from any deposit, investment, or retirement accounts - 401(k)s, IRAs, CDs, mutual funds, savings, and checking accounts
Down payment gift letter if you're using gift funds
Information on any other real estate/properties you own - including any information about any outstanding mortgages, intended use, and monthly expenses related to the property
Loan statements - from the past 60 days for auto loans, credit cards, personal loans, student loans, etc.
Credit History
Although your lender will pull your credit reports as part of the underwriting process, it is a good idea to review them beforehand so that you can make sure everything is correct and to get an idea of what your lender will see. You can get a free copy of your credit report from all three consumer credit bureaus at AnnualCreditReport.com. If you have any derogatory information on your credit report, your lender may ask you to provide a letter of explanation. This is where you explain what happened that resulted in the derogatory information. Be prepared to do some research into your accounts and provide explanation for any issues.Letter of explanation - explains late payments, collections, judgements or other derogatory information on your credit report
Bankruptcy or Foreclosure Records
For limited credit history - your lender may ask for payment history for other bills like your cellphone, car insurance, utilities, etc.
Other Important Records
Identification - driver's license, Social Security card or other form of ID, as well as immigration paperwork (if applicable)Residence History
- Previous addresses for the last 2 years and how long you lived at each location
- If you currently rent, have your landlord's name, address and phone number to verify the most recent 12-month rental history
For Refinances - you will need some additional documents about the loan you are looking to refinance
- Most recent property tax bill
- Most recent homeowner's insurance bill
- Most recent mortgage statement or coupon book
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