In a Nutshell
Depending on your unique situation, there are several documents you might need when you apply for a home loan, including your tax returns, pay stubs, bank statements and credit history.
The list can seem very daunting to new mortgage seekers, but it doesn’t have to be if you’re prepared.
This mortgage loan documents checklist will help prepared you with the correct mortgage documents to ensure your mortgage application goes smoothly.
Mortgage Loan Documents Checklist – 14 Documents you need when you apply for a mortgage loan:
- Photo ID and Social Security Card
- Last 2 years tax returns
- Pay check stubs (last two months)
- W-2’s from Current and Past Employers
- Profit and loss statements.
- Bank Statements (last two months all accounts)
- Credit Report
- Gift letter (if using gift funds)
- List of your debts
- List of all your assets
- Renting history
- Proof of additional income.
- Divorcee decree (if applies)
- Bankruptcy paperwork (if applies)
1. Photo ID and Social Security Card
You’ll likely need to provide a photo ID, such as a driver’s license and a copy of your Social Security card. This is simply to prove you are who you’re claiming to be.
2. Tax returns
Mortgage lenders want to get the full story of your financial situation. You’ll probably need to sign a Form 4506-T, which allows the lender to request a copy of your tax returns from the IRS.
Lenders generally want to see one to two years’ worth of tax returns. This is to make sure your annual income is consistent with your reported earnings through pay stubs and there aren’t huge fluctuations from year to year
3. Pay check stubs
Lenders may ask to see your pay stubs from the past months or so. Your tax returns help give them a clear idea of your overall financial health, while pay stubs help them gauge your current earnings. If you’re self-employed or have other sources of income (such as child support), you may need to show your lender proof through 1099 forms, direct deposits or other means.
4. W-2’s from current and past employment
Lenders may ask for W-2 forms for all jobs worked in the past two years issued by your employer or k1s (if you are self-employed).
5. Profit and Loss Statements
For self-employed individuals, in lieu of producing W-2’s, you will likely need to produce a profit-and-loss statement for the current year.
6. Bank statements and other assets
When assessing your risk profile, lenders may want to look at your bank statements and other assets. This can include your investment assets as well as your insurance, such as life insurance.
Lenders typically request these documents to make sure you have several months’ worth of reserve mortgage payments in your account in case of an emergency. They also check to see that your down payment has been in your account for at least a few months and did not just show up overnight.
7. Credit report
In order to assess you as a borrower, lenders often pull your credit report — with your verbal or written permission.
According to mortgage brokers in the industry you may need to explain any blemishes on your credit report. Blemishes might include a previous short sale or a foreclosure.
“You should be prepared to write a statement that explains negative items on your credit report,” Also, “This helps a lender evaluate what kind of risk you are. Lenders may look at one-time unavoidable circumstances differently from habitual delinquency.”
8. Gift letters
Your friends and family might help you buy a house by giving you money. If that’s the case, you’ll need to provide a written confirmation the money is indeed a gift and not a loan. The documentation should list their relationship to you as well as the amount of the gift.
9. Debt Lists
In addition to providing income about your income, your lender will want to see a full listing of your debts. This aids the lender in determining your debt-to-income ratio, which factors heavily into lenders’ decisions.
10. Asset Lists
Your lender will likely request bank statements for your checking and savings accounts to verify your down payment source and the value of the accounts. Along with those statements, you will also need to provide a list of your assets so the lender knows you are financially sound and will remain in a good financial position after paying both the down payment and the closing costs associated with the requested mortgage.
11. Renting history
For buyers who don’t already own a home, many lenders will request proof that you can pay on time. They may ask for a year’s worth of canceled rent checks (check that your landlord has cashed). Or, they might ask your landlord to provide documentation showing that you paid your rent-on time. Your renting history is especially important if you don’t have an extensive credit history.
12. Proof of additional income
If you have any additional income that you want your lender to take into consideration when making a lending decision. You will need to produce proof of that income. If you have rental income from a home or farm. Copies of the lease agreement or monthly payments will be enough for current year investments. However, for older investments it should be reflected on your tax returns. For alimony or child support, a copy of the court order may be necessary. You will need proof in the form of your bank statements or copies of cancelled checks showing the payments are regularly made and you may have to provide proof of your child’s age.
13. Divorce Decree
You will need to produce a divorce decree if you have been married in the past. Sometimes even years after a divorce has been finalized, the lender will still need the decree. This document will typically reveal to a lender if there are relevant child support or alimony obligations.
14. Bankruptcy documents
If you have been through bankruptcy, the lender may wish to see proof that certain debts have been discharged through bankruptcy and are no longer outstanding. The lender needs to ensure that you are no longer legally obligated to pay those debts in order to fully understand your financial position.
Keep in mind that this mortgage loan documents checklist is not exhaustive. Depending on your personal situation and your lender, you may be asked to produce more or less documents than those that appear above.
Any time your lender requests documents, try to respond quickly and produce all of the requested documents. If you fail to do so, you will slow down the approval process.
If you’re having difficulty finding or producing documents for some reason. Communicate with your lender to see if other documents may provide them with the information that is needed.
As time passes, if you receive new documents relevant to your application. Give the previously-produced documents to ensure your lender has all the information necessary to get you approved.
It’s best to go through this mortgage loan documents checklist and have everything ready before applying.
This will make the mortgage process less stressful and you will be on the road to purchasing your new home without all the headaches.