Mortgage Approval: Here’s The List of Documents You Need

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Mortgage Approval: Here’s The List of Documents You Need

September 28, 2021

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Getting a mortgage pre-approval is one of the first and the most important steps in your journey to become a homeowner. Although it is not mandatory to have a pre-approval, it is recommended because it proves to the sellers that you have the finances to stand behind the offer you are making.

If you have a good financial history, your chances of getting a mortgage approval are increased significantly. However, you need to provide the lender with certain documentation to verify that the financial information you are sharing is true.

In this post, we will be sharing the list of documents required to get a mortgage pre-approval. Let’s begin.

 Documents You Need To Get Mortgage Pre-Approval

1. Proof Of Income And Employment 

The first document that a lender is going to require from you is your income proof. Depending upon your source of income i.e. whether you are salaried or self-employed, the documents will vary, which is explained ahead:

If you are salaried, then you must provide:

  • copies of your W-2 forms
  • two most recent pay stubs
  • two most recent bank statements
  • tax returns for the last two years

If there is any bonus income or overtime payments, then you need to also provide the most recent end-of-the-year pay stub.

If you are self-employed, an independent contractor or a freelancer, you must provide:

  • a year-to-date profit and loss statement
  • business and personal tax returns for the last two years
  • IRS Form 4506-T
  • Any additional income, like disability or social security

2. Assets 

Proof of assets is the second important document you need to get pre-approved. The proof of assets document proves that you have sufficient cash reserves to pay the down payment on the house and the closing fees while still having enough for an emergency fund. 

The following documents will work as proof of assets: 

  • bank statement for the last two months for every account that you intend to use for getting a loan
  • statement for the last two months for your investment, retirement, or saving accounts, such as 401(k)s, IRAs, and CDs

3. Debt Statements 

A lender is going to require information about any current loans or credit cards against your name to calculate your debt to income ratio.

The debt to income (DTI) ratio is the percentage of your gross monthly income that goes towards paying any outstanding debts.

DTI helps the lender get a clear picture of a borrower’s ability to qualify for a mortgage and the amount he or she can afford. Lenders generally prefer borrowers who have a lower DTI, as it ensures they have limited liabilities to take care of.  

Here is the list of documents you need to provide for your current debts:

  • Statement for student loan
  • Previous mortgage statement
  • Recent credit card statements
  • Statement for auto loans

If you don’t have any history of debt or any credit history at all, the lender might ask for utility bills or any other proof of regular payments instead.

4. Other documents 

Under special circumstances where you rely on other sources of income rather than the ones listed above, the lender might ask you to provide the following documents:

Proof of payments for your rental property for a year or more, along with the contact information of your landlord to verify your information.

If child support and alimony make a major part of your income you’ll need to provide documentation of your divorce and any court orders involved.

Special cases 

In Case of Past Bankruptcy

If a person has filed bankruptcy in the past or faced foreclosure, then they must honor a waiting period before being eligible for a new mortgage. To know about the waiting period and the documents required in such cases, you should discuss them with the lender.

Down payment

In certain special cases, where the borrower has received the money in the form of a gift from someone, the lender might ask you to provide a gift letter from the donor. The gift letter should state expect to get the money paid back, and also provide the source of money. All of this might not be required during the pre-approval process, but you are certainly going to need it in the future for getting a mortgage.

5. Identification Documents 

Apart from all of the documents mentioned above, the lender might ask you for identification documents to verify if you are a genuine buyer and prevent any fraud.

You can provide any of the documents listed below as an ID:

  • Passport
  • Driver’s license
  • Social Security Card
  • ITIN (Individual Taxpayer Identification Number)
  • State / Federal Issued ID Card

FAQ (Frequently Asked Questions)

How long does mortgage approval take? 

There is no set timeline, but it may take up to 30 days to get mortgage approval. Depending upon how much time it takes for you to gather and provide the documents to the lender, the duration can vary.

Does a mortgage pre-approval expire? 

A mortgage pre-approval is good for anywhere from 60 to 90 days. Since you get a preapproval based on your financial circumstance, which can change over the course of time, there is this expiry date associated with pre-approvals.

Summing it up

If you are planning to get mortgage approval, prepare early on and meet the lender with all of these documents at the ready to expedite the process. You should also consider meeting with a few different lenders to decide which is the best mortgage option for you.

Want to learn more about best mortgage practices? Check out our previous blog post that tells you about the different types of mortgages out there and how you can get the best mortgage rates.

All the best!