Purchasing a home is a significant financial milestone, and securing a mortgage is a crucial step in the process. To ensure a smooth and successful mortgage application, it’s essential to have all the necessary documents in order.
This mortgage checklist will walk you through the various records you’ll need to provide, ensuring you’re well-prepared for this important endeavor.
Basic Application Information
The first thing on your home loan checklist is to have all of your basic information ready. To initiate the mortgage application process, you’ll need to provide some fundamental information about yourself and the property you intend to purchase.
This includes your full legal name, date of birth, social security number, and the address of the desired property.
Additionally, you’ll need to specify your intended occupancy status – whether the property will serve as your primary residence, a second home, or an investment property.
If you’re applying for the mortgage jointly with a co-borrower, such as a spouse or partner, you’ll need to provide the same basic information for them as well.
It’s important to note that having a co-borrower can potentially strengthen your application, as lenders will consider both parties’ income, assets, and credit profiles.
Income Verification
One of the most important things on your mortgage application checklist is verifying your income and employment history.
Lenders need to ensure that you have a stable and sufficient income stream to comfortably meet the monthly mortgage payments and that you can save money for a house. Here are the documents you’ll typically need to provide:
Paystubs
Lenders generally require your most recent paystubs covering the last 30 days. These documents provide a clear picture of your current income and pay frequency. They should also reflect any bonuses, commissions, or overtime pay you’ve received.
W-2 Forms
You’ll need to submit W-2 forms from the previous two years, which summarize your annual income and tax withholdings. These mortgage papers help lenders understand your income patterns and verify the information reported on your tax returns.
Federal Income Tax Returns
Be prepared to provide your most recent two years of federal income tax returns, including all schedules and forms. These home loan documents offer a comprehensive overview of your income sources and deductions, as well as any self-employment income or rental property income.
Child Support or Alimony
If you receive child support or alimony payments, you’ll need to provide documentation to verify these income sources, such as a court order or divorce decree.
Self-Employment Documentation
If you’re self-employed, you’ll need to submit two years’ worth of tax returns, as well as profit and loss statements, balance sheets, and any other documents that demonstrate a steady and consistent income from your business.
Lenders may also require a year-to-date profit and loss statement to ensure your business is still performing well.
It’s crucial to provide accurate and complete income documentation, as lenders will closely scrutinize these records to assess your ability to make timely mortgage payments.
Credit History
Another important factor on your mortgage loan documents checklist is your credit score. Your credit score and credit history play a pivotal role in the mortgage approval process and the interest rate you’ll be offered. Lenders will obtain your credit report from one or more of the major credit bureaus (Experian, Equifax, and TransUnion) to assess your creditworthiness.
It’s advisable to review your credit report before applying for a mortgage and address any errors or discrepancies that may exist.
While a higher credit score typically results in more favorable loan terms, lenders will also consider your overall financial picture, including your income, assets, and debt-to-income ratio.
Even with a lower credit score, you may still qualify for a mortgage, but you may need to provide additional documentation or make a larger down payment.
If you have a thin credit file or limited credit history, lenders may request alternative forms of credit data, such as utility bills, rental payments, or other recurring payments, to gauge your financial responsibility. The same applies if you are applying for a mortgage rebate, which many lenders offer as an incentive for taking out a loan with them.
Spending, Expenses, and Debts
To gain a better understanding of your financial situation, lenders will evaluate your spending habits, existing debts, and overall financial obligations. Prepare for your mortgage checklist by providing the following documents:
Bank Statements
You’ll need to submit your most recent two to three months’ worth of statements for all checking, savings, and other asset accounts. These statements provide insight into your income and spending patterns, as well as your ability to save and manage your finances responsibly.
Retirement and Investment Account Statements
If you have retirement accounts (such as a 401k or IRA) or investment accounts, you’ll need to provide statements for these as well. Lenders view these accounts as potential sources of funds for a down payment or closing costs, as well as indicators of your long-term financial planning.
Debt Information
Provide details on any outstanding debts you have, including credit card balances, auto loans, student loans, and personal loans. Lenders will use this information to calculate your debt-to-income ratio, which is a key factor in determining your ability to take on additional debt in the form of a mortgage.
By reviewing your spending patterns and existing debt obligations, lenders can assess your ability to manage the additional financial responsibility of a mortgage payment while maintaining a healthy financial standing.
Other Records
Depending on your individual circumstances, you may need to provide additional mortgage documents. Here are some common examples:
Rental History
If you’re currently renting, your lender may request a rental history from your landlord or copies of canceled rent checks to demonstrate your ability to make consistent housing payments.
This documentation can be especially helpful if you have a limited credit history or are looking to offset a lower credit score. Your lender wants to ensure you will make timely payments for your mortgage. You can even save money on your mortgage over time by making bi-weekly payments, something that doesn’t save you money when renting.
Divorce Decree
If you’ve been divorced, you’ll need to provide a copy of your divorce decree, especially if you’re responsible for alimony payments or child support. These financial obligations will be factored into your debt-to-income ratio and overall affordability assessment.
Purchase and Sale Agreement
If you’re selling your current home, you’ll need to provide a copy of the purchase and sale agreement. This document helps lenders understand the timeline and financial aspects of your home sale, which may impact your ability to obtain a new mortgage.
Identification for Non-Citizens
If you’re not a U.S. citizen, you’ll need to provide a valid form of identification, such as a green card or work visa, to verify your legal status and eligibility for a mortgage.
Alternative Credit Data
If you have a low credit score or a thin credit file, the lender may request alternative forms of credit data, such as utility bills, rental payments, or other recurring payments to assess your financial responsibility. This can help compensate for a limited traditional credit history.
Mortgage Checklist: FAQs
What documents do I need to apply for a mortgage?
The primary documents required for a mortgage application include:
- Identification (driver’s license, passport, etc.)
- Income verification (paystubs, W-2s, tax returns)
- Credit report
- Bank statements
- Proof of assets (investment/retirement accounts)
- Debt information (credit cards, loans, etc.)
- Rental history (if applicable)
- Divorce decree (if applicable)
How far back do I need to provide tax returns and bank statements?
Most lenders will require your most recent two years of tax returns and two to three months of bank statements. However, be prepared to provide additional years or months if requested by the lender.
Can I get a mortgage with a low credit score?
While a higher credit score generally results in more favorable loan terms, it is possible to obtain a mortgage with a lower credit score. However, you may need to provide additional documentation, such as alternative credit data or a larger down payment.
Lenders may also require you to have a higher income or lower debt-to-income ratio to offset the increased risk associated with a lower credit score.
What if I’m self-employed?
If you’re self-employed, you’ll need to provide two years’ worth of tax returns, as well as profit and loss statements, balance sheets, and other documents that demonstrate a steady and consistent income from your business.
Lenders need to verify that your income is stable and sufficient to support the mortgage payments. They may also request a year-to-date profit and loss statement to ensure your business is still performing well.
What if I’ve recently changed jobs or had a gap in employment?
If you’ve recently changed jobs or experienced a gap in employment, the lender may require additional documentation to verify your current income and employment status.
This could include offer letters, employment contracts, or written explanations for any gaps in employment. The lender needs to ensure that your income is stable and reliable before approving your mortgage.
Final Thoughts
Making a mortgage checklist and gathering all the necessary documents can be a difficult process, but it’s essential to ensure a smooth and successful transaction.
By being prepared and having all the required mortgage paperwork in order, you’ll be one step closer to achieving your dream of homeownership.
If you are in the process of looking to purchase a new home, ARC Relocation can help you save thousands with our Realtor Rebate. Whether you need assistance with selling or buying your home or shipping your belongings, ARC can help. Contact us at ARC Relocation today for more information.