To get a mortgage loan, you must prove to the lender that you are a good risk, aka that you can afford the loan.
To do this, you must understand the documents needed for a home loan. The list is extensive, but it’s to ensure you can afford the loan and aren’t getting in over your head. All lenders must do their due diligence to ensure you can afford the loan beyond a reasonable doubt.
Here are what documents you need to get a home loan.
Documentation to Get a Mortgage Loan
Before you apply for a mortgage loan, take the time to familiarize yourself with the documentation needed. Whether you’ve already found a home, or you’re applying for mortgage pre-approval, lenders will require the following documentation to approve you for a loan.
Credit Score Documentation
One of the first things lenders look at when you apply for a home loan is your credit score. While you aren’t responsible for providing the credit reports for the lender, you must sign a disclosure that allows them to pull your credit.
When they pull your credit, it will create an inquiry on your credit report. The inquiry shows other lenders that you’ve recently applied for credit, and it might ding your credit score slightly.
This step is necessary to ensure you have the credit history necessary to afford the loan you’ve applied for.
Income Documentation
Next, lenders need to know that you make enough money to afford the mortgage loan. To do this, they’ll ask questions about your income. But just hearing from you about how much money you make isn’t enough. They’ll also need proof of income with the following documents:
Paystubs
If you work for an employer, you must provide the last 30 days of paystubs. The number of paystubs required depends on the frequency you are paid. For example, if you’re paid weekly, you’ll need 4 paystubs; if you’re paid bi-weekly, you’ll need 2 pay stubs, and if you’re paid monthly, you’ll need just one paystub.
W-2s
Most lenders require W-2s from all jobs from the last 2 years. If you held a couple of jobs during that time, you must provide W-2s from all jobs.
Income tax return
If you work for yourself or you work on commission, you may need to provide the last 2 years of tax returns with all schedules so the lender can determine your average monthly income based on what you claim.
Employment Documentation
In addition to verifying your income, lenders must ensure you are actively employed. Typically, they’ll conduct a verbal verification of employment which involves them calling your employer and asking a few basic questions.
If they can’t get in touch with your employer or they need more written proof of your employment, they may request a written verification of employment from your employer to match what they write to any income documentation you provided.
Asset Documentation
Lenders must also vary your assets, especially any money you plan to put down on the home and any funds used for closing costs.
If the home loan program requires reserves (money left in your account to cover mortgage payments), they’ll verify those assets too.
To prove your assets, you must provide the last 2 months of bank or investment statements. Lenders look for any large deposits or withdrawals on the statements, as they can be red flags. They also look for regular receipts of your income on your statements.
If you don’t receive paper statements, you can print your online statements for the lender, just make sure the bank name and date are on the statements, along with your full name, and that you include all pages of the statements.
Sales Contract
If you’re buying a home, lenders need the executed purchase contract. The contract should include all details of the sale and have every party’s signature. There must be a clear sales price, closing date, and conditions of the sale listed on the contract.
Miscellaneous Documentation
In addition to the documentation above, you might need to provide some or all of the following documents to get a mortgage loan:
Alimony or child support agreements
If you’re responsible for paying alimony or child support, you must provide the agreements because lenders must include the payments in your debt-to-income ratio. If you receive payments, you don’t have to disclose them if you don’t need them to qualify for the loan. However, if you need the income to qualify, you must submit the agreements along with evidence that the income will continue.
Bankruptcy or foreclosure paperwork
If you have a previous bankruptcy or foreclosure, you might need to provide the paperwork proving they’ve been discharged. You may also need the paperwork to prove certain creditors were included in the BK if the information isn’t reporting right on your credit report.
Letter of explanation
If you have any unique circumstances, you may need to explain them in a written letter. The letter should provide a clear explanation for lenders to help them understand your situation and why you are a good risk for a loan.
Final Thoughts
Understanding the documents needed to secure a home loan will help you go through the process much faster. You can have your documentation ready so that you’re able to get through underwriting with ease.
Lenders require an extensive amount of paperwork to ensure you can afford the loan. Providing the necessary documentation helps you understand if you are ready to take on a mortgage loan too. Since a mortgage is one of the largest investments you’ll make in your lifetime, it’s important to ensure that you can follow through on the loan.
Working with a reputable broker can help you ensure you get the support you need. You’ll know what documentation is required of you and what lenders require to expedite your arrival at the closing table.
