4 Documents You Need for Mortgage Pre-approval

November 28th, 2018 | Purchasing a Home

A pre-approval letter reflects an early lender review of the information provided. It is not final approval, and the lender may request additional records later.

1. Income & Employment Documents – All lenders want to see that you are currently employed and also proof of income to decide how much house you can afford. To document your income, lenders usually want copies of your tax returns from the previous two years. In order to prove employment (and income) for mortgage pre-approval, lenders require W-2 forms. Your most recent payroll stubs may be required as well. End-of-year payroll stubs may be required if your yearly income includes bonuses or overtime.  For those who are self-employed, 1099s forms can be used. If you receive income from rental properties and want it to count towards qualifying for a mortgage, you will need to provide documentation of your rental income and current market value of the property.
2. Asset Documents – Lenders will want to check that you have cash for a down payment as well as reserves for mortgage payments in the future. You will need to provide bank statements for the past two months as well as statement from any investment accounts you have, including IRAs, 401(k)s, and any stock and bond accounts.
3. Debt Documents – Mortgage lenders look for low debt-to-income ratios so you will need to provide documents related to any debts you have. The most common types include student loans, auto loans, credit cards and other mortgage loans. Your documentation should provide creditor names and addresses, your loan balance and your minimum required payment.
4. Special Exceptions and Circumstances Documents – There are plenty of situations where you something needs to be explained about your finances. Include documentation about any of these to aid the pre-approval process. These might include documents about previous bankruptcy or foreclosures, down payment gift letters if you are receiving part or all of your down payment from someone else, divorce documents listing any alimony or child support you are receiving or paying. For first-time home buyers, rental documents such as proof of rent payments for the past year may be required.

Preparing records in advance can help the review begin. The lender will review the information and credit, and may ask for different or additional paperwork based on the application.

For questions about the records to prepare, contact us.