If you’re looking to buy a home, you’ll likely need a mortgage. Before approving your mortgage application, your lender will want proof that you can afford to repay the loan. You’ll need to document your finances so the lender can determine whether to approve you for a loan and, if so, for how much. Here’s a look at the documents you’ll likely need to provide your lender with to apply for a mortgage.
Key Takeaways:
If you’ve already provided documents for mortgage preapproval, applying for a mortgage will be similar. Most lenders ask mortgage applicants to complete a standardized Uniform Residential Loan Application form. You’ll need to complete this nine-page form and provide details about your employment, income, savings, debts and more. Lenders collect this information to determine both your eligibility for the mortgage and how much house you can afford.
The purchase and sale agreement is a legally binding contract between the buyer and the seller. It spells out the details and mutually agreed-upon terms of the sale, including the purchase price, conditions, earnest money deposit and closing date. Your lender will want to confirm that a sale is underway and that you are under contract with a seller before issuing you a loan.
Your lender will need to verify your identity. To do that, they may ask for several pieces of personal identification, such as a driver’s license, passport, Social Security card, individual taxpayer identification number or government-issued ID card. This ensures the lender is lending to the right person, which helps prevent identity theft.
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The documents needed to verify your income depend on your work, how you get paid and whether you recently started a new job. This is usually easiest for full-time employees who receive a paycheck from a single employer.
Income documents may include:
Freelancers, self-employed workers and independent contractors don’t receive pay stubs or W-2 forms from an employer. So they need a different range of documents, like:
Landlords or owners of rental properties may need to show documentation of current leases.
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Lenders use several documents to verify your income. Because of this, you may also have to come ready with statements from your checking and savings bank accounts. Typically, lenders require statements dating back at least two or three months.
Bank statements help show you can afford your down payment and reveal potential red flags. For example, a bank statement can show bounced checks, unstable income, low funds, deposits from unknown sources and payments to other accounts.
Some people keep their funds in places outside savings and checking accounts. Individuals with alternative sources of income, such as investors, need to show proof of income and assets, too. As a result, your lender may have to review investment account statements from retirement accounts, bonds, mutual funds and stocks, if applicable.
Expect to provide statements from the following applicable types of assets:
Since lenders want to know your available income and assets, they also need to know how much of that money goes toward debt. So they review your debt-to-income ratio and see if it fits within their guidelines.
Variable, monthly expenses such as utilities or groceries aren’t included as debt in calculating your DTI ratio, but other recurring, regular costs are, such as:
If you have to provide records of debt payments to your lender, include the name of the creditor, the creditor’s contact information, the monthly minimum payment and the total balance owed.
Depending on your situation, you also may need to supply the following documents where applicable:
Don’t be surprised when your lender asks you to upload various financial documents. These documents help the lender decide how much you can afford to borrow. Gathering these documents in advance can make the mortgage application process go more smoothly.
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Ashley Kilroy contributed to the reporting of this article.
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