If you’re applying for a mortgage, you need to be ready for the in-depth approval and income verification process from your lenders. Lenders have to accurately assess the ability of borrowers to be able to pay back any loan, which means carefully looking over documents such as tax forms, income verification, bank statements, and credit reports. Although the exact forms you need will vary depending on your specific loan, the following is a list of what the typical lender will be looking for.
Pre-Approval Process vs. Approval Process
When you go through a pre-approval process for a mortgage, your lender looks at your income and credit history, among other things, to get an idea of which loan programs you qualify for. This will tell you the maximum loan size you qualify for and the interest rates that go along with it. For the pre-approval process, you still need to bring your lender certain documents, many of which are the same as the ones you’ll need for the full application.
Once you’re pre-approved for a loan, much like a credit card, you don’t necessarily have to apply for that specific one. Choose the loan that fits your specific needs. Take into consideration interest rates, loan length, and monthly payments.
Have the following documents prepared before you begin the pre-approval and full approval loan process and you will have an easier time navigating your mortgage journey.
Complete Loan Application
If you find a loan that seems right for you after the pre-approval process, you’ll need to fill out a complete loan application to give to your lender. Some of these loan applications can be done online, with the supporting documents attached or scanned in. Other times, these applications will need to be handed directly to your lender.
Official identification such as a driver’s license, state-issued I.D. card, military I.D., or passport will work to prove your identification during the approval process.
Income-Verifying Tax Forms
You’ll need to provide tax forms that verify your income, such as your W2 form, 1040 form, and 1099 form if you have any additional income from a source other than your employer. Bring at least two years’ worth of these forms in order for your lender to get an idea of your steady income and employment. If you’re self-employed or a contract worker, expect to provide documents that prove you’ve been steadily receiving income, such as two years of income tax returns.
To show that you’re currently employed and therefore receiving steady, livable income that you can use to pay back the loan, bring two to three months’ worth of pay stubs.
Bring your bank statements from the last two to three months so that you can assure your lender that you have sufficient funds in your accounts to cover the loan down payment.
If you have any economic resources (or assets) that are adding to your net worth, such as cars, investments, or properties, you’ll need to provide proof in the form of asset statements.
Although you personally don’t have to provide your lender with your credit report, you do need to give permission for them to run a credit check through a credit report system. This will allow them to see if you have a good payment history or any delinquent accounts, and calculate your debt-to-income ratio (DTI).
If you currently rent your home, you’ll need to provide your lender with rental history and contact information for your current landlord to show that you have made payments on time and are in good standing.
All of these documents are essential to provide your lender a clear and detailed picture of your financial history, and will inform them on your ability to pay your mortgage on time and in full in the future. Gather these supporting documents and you’ll be sure to move swiftly through the loan application process.
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