What Documents Are Needed For a Home Loan?
Do you know the documents needed to get approved for a mortgage?
Before applying for a home loan, it is essential to prepare your financial documents. Understanding how to get a mortgage is crucial for buyers.
Mortgage lenders will require several documents with your application to prove your income and debts. The documents that will be required will depend on the type of financing program.
For instance, a self-employed borrower will have different loan requirements than a business employee.
Lenders will use bank statements, recent pay stubs, tax returns, and W-2 forms to analyze whether they will grant a mortgage.
We will examine documents needed for a mortgage for some of the most popular loan programs, including conventional, FHA, VA, and USDA.
Getting Pre-Approved For a Mortgage is Essential
Getting pre-approved for a mortgage is a significant step in the home-buying process.
While pre-qualifying can seem appealing because it requires so much less work, pre-approval is way more likely to help you make a successful offer on a home.
In other words, there is a difference between pre-qualification and pre-approval.
Pre-approval shows that you are likely to get a mortgage—while pre-qualification only indicates that there is a possibility that you could get a mortgage.
Especially in competitive markets, pre-approval is a must-have before you start making offers.
You are not alone if you feel a little daunted by the paperwork you must gather and complete for a mortgage.
Most home loans require extensive paperwork. It will take time and effort to get everything ready and complete the application process.
One serious bonus to going through the pre-approval process is that you will be well-prepared for the actual mortgage application process.
Most of what you do in pre-approval will apply to the official application.
After choosing a lender, this is precisely what they will be looking for to complete the application and pre-approval.
Here is a list of documents needed for a mortgage. Most of these requirements apply to the popular mortgage programs for buyers.
Documents for a Mortgage With Conventional Loans
Let’s examine what you need to give a mortgage lender for a conventional loan.
A conventional loan is a standard loan that does not involve a particular program like the FHA or USDA. A conventional mortgage is one of the most popular loan products in the world.
You may apply for a conventional loan if you don’t qualify for these particular loan programs and get W-2s each year.
One of the few downsides of most conventional loans is you will pay private mortgage insurance (PMI) if you put less than twenty percent down.
The mortgage documents you will need for conventional pre-approval include the following:
- Identification (one of which you need to present in person)
- A valid Driver’s license
- A Passport
- An Official state or federal ID
- Income
- 30 days of pay stubs
- Your previous two federal tax returns
- Your last two W-2s
- Proof of additional income—such as alimony or social security
- Finance Accounts
- Bank statements for the last two statement periods
- Investment and retirement account statements
- Property you own
- Statement showing the settlement of your prior home sale if you have one
- Additional documents
- Gift letter from any family member helping with a down payment
- Landlord contact information for the last two years
- Letter of explanation concerning issues like collections and any other problems on your credit report
- Divorce-related documents, if applicable
Documents For a Mortgage With FHA Loans
FHA loans
are one of the most popular types of loan products out there.
One of the most significant advantages of an FHA loan is the low 3.5 percent down payment.
Not every property qualifies for an FHA loan, especially when buying a condominium.
It is essential to check if the complex you are buying at has been FHA approved.
As mentioned in the reference, there are also condition requirements for a house to be eligible.
Mortgage documents required for a Federal Housing Administration loan include the following:
- Identification (one of which you need to present in person)
- A valid driver’s license
- A passport
- An official state or federal ID
- Income
- 30 days of pay stubs
- Your previous two federal tax returns
- Your last two W-2s or previous two 1099s
- Proof of additional income—such as alimony or social security
- Finance Accounts
- Bank statements for the previous two statement periods
- Investment and retirement account statements
- Property you own
- Closing disclosure for purchase, or HUD-1 if the sale occurred before October 3, 2015
- Additional documents
- Gift letter from any family helping with a loan down payment
- Landlord contact information for the last two years
- Letter of explanation concerning issues like collections and other problems on your credit report
- Divorce-related documents, if applicable
Documents For A Mortgage With an Investment Property Purchase
If you are buying a property that you intend to rent, such as a multi-family, the records you need for pre-approval will include the following:
- Identification (one of which you need to present in person)
- A valid driver’s license
- A passport
- An official state or federal ID
- Income
- 30 days of pay stubs
- Your previous two federal tax returns
- Your last two W-2s or previous two 1099s
- Proof of additional income—such as alimony or social security
- Finance Accounts
- Bank statements for the previous two statement periods
- Investment and retirement account statements
- Property you own
- Settlement statement for recent home sales
- Recent statements for mortgages you have on other properties
- Proof of insurance for all your properties
- Current leases for all your rental properties
- Additional documents
- Gift letter from any family helping with payment
- Landlord contact information for the last two years
- Letter of explanation concerning issues like collections and other problems on your credit report
- Divorce-related documents, if applicable
Mortgage Documents Needed For Self-Employed or Business-Owners
If you are self-employed or own your own business, you will need the following mortgage documents for approval:
- Identification (one of which you need to present in person)
- A valid driver’s license
- A Passport
- An official state or federal ID
- Income
- 30 days of pay stubs
- Your previous two years of federal tax returns
- Your last two W-2s or previous two 1099s
- Proof of additional income—such as alimony or social security
- Finance Accounts
- Bank statements for the previous two statement periods
- Investment and retirement account statements
- Last two years of tax returns for Corporate, S-Corp, LLCs, etc.
- Last two years of 1099s
- Property you own
- Settlement statement from your previous home sale
- Additional documents
- Gift letter from any family helping with a down payment
- Landlord contact information for the last two years
- Letter of explanation concerning issues like collections and other problems on your credit report
- Divorce-related documents, if applicable.
- Current business license
- Balance sheet, if applicable
- Profit and loss statements for the last two months
Mortgage Documents Needed to Get a VA Mortgage
A veteran’s loan is a fantastic mortgage product for those serving or who have served in the military.
One of the most significant benefits of a VA mortgage is that you don’t need a down payment. It is one of the few no-down payment loan products still available.
You should also be aware that there are minimum property standards for a VA loan.
The Veteran’s Administration will ask for the following mortgage documents for approval:
- Identification (one of which you need to present in person)
- A valid driver’s license
- A passport
- An official state or federal ID
- Income
- 30 days of pay stubs
- Your previous two federal tax returns
- Your last two W-2s or previous two 1099s
- Proof of additional income—such as alimony or social security
- Finance Accounts
- Bank statements for the previous two statement periods
- Investment and retirement account statements
- Property you own
- Settlement statement from your last home sale
- Additional documents
- Certificate of Eligibility from the Veteran’s Administration, which may require some or all of these documents:
- Form DD-214, certificate of release or discharge
- Statement of service from the adjutant, personnel office, commander, or higher headquarters if still on active duty
- Form 26-1817 or form 21-534 for surviving spouses, plus form 1300, report of casualty, or death certificate
- Landlord contact information for the last two years
- Letter of explanation concerning issues like collections and other problems on your credit report
- Divorce-related documents, if applicable
- Certificate of Eligibility from the Veteran’s Administration, which may require some or all of these documents:
Mortgage Documents Needed For a USDA Loan?
A USDA loan is the other no-down payment loan product available to buyers.
However, the USDA loan can only be written in rural areas. The definition of rural is generally under a population of thirty-five thousand people.
The U.S. Department of Agriculture will need the following documents for mortgage approval:
- Identification (one of which you need to present in person)
- A valid Driver’s license
- A passport
- An official state or federal ID
- Income
- 30 days of pay stubs
- Your previous two federal tax returns
- Your last two W-2s or previous two 1099s
- Proof of additional income—such as alimony or social security
- Finance Accounts
- Bank statements for the last two statement periods
- Investment and retirement account statements
- Property you own
- Settlement statement from your previous home sale
- Additional documents
- Gift letter from any family helping with payment
- Landlord contact information for the last two years
- Letter of explanation concerning issues like collections and other problems on your credit report
- Divorce-related documents, if applicable
- Form 410-4: Uniform Residential Loan Application, filled out by (s)
- Form 3550-4: Employment & Asset Certification, a separate form filled out and signed by each applicant
- Form 3550-1: Authorization to Release Information, a separate form filled out and signed by each applicant and each adult household member
- Form 4506-T: Request for Transcript of Tax Return, a separate form filled out by each applicant
- Life insurance policy
- Child care expenses documentation for any dependent 12 or younger
- Current school transcript for household members who are full-time students and 18 years or older
- Annual medical expenses for applicants 62 years of age or older or with a disability (to be considered for an in-household income)
- A written explanation of two years of employment history, including an explanation of gaps if there are any
Mortgage Documents Needed For A Job-Based Incentive Loan
Some programs are intended to help workers in particular professions own homes, such as teachers, police, and firefighters.
One of the more well-known programs is called Good Neighbor Next Door. Each has its criteria, but most will require the following:
- Identification (one of which you need to present in person)
- A valid driver’s license
- A Passport
- An official state or federal ID
- Income
- 30 days of pay stubs
- Your previous two federal tax returns
- Your last two W-2s or previous two 1099s
- Proof of additional income—such as alimony or social security
- Accounts
- Bank statements for the prior two statement periods
- Investment and retirement account statements
- Property
- Settlement statement from your previous home sale
- Additional documents
- Gift letter from any family helping with payment
- Landlord contact information for the last two years
- Letter of explanation concerning issues like collections and other problems on your credit report
- Divorce-related documents, if applicable
Understanding Documents Needed For a Mortgage Application
Let’s review what to know about each document you need when applying for a mortgage.
Tax Returns
Without tax returns, it is challenging for mortgage lenders to understand your finances. You’re likely to be asked by the lender to sign a 4506-T which permits lenders to get your tax returns from the Internal Revenue Service (IRS).
Most lenders will require two years of tax returns. The tax returns are used to verify that your income matches what’s been reported on your pay stubs.
W-2s or Pay Stubs
Mortgage lenders typically ask for a couple of months of pay stubs. While tax returns will better understand your broader financial picture, pay stubs validate your current earnings.
If you are self-employed or possess other sources of income, such as child support payments, then it is necessary to provide your lender with evidence, perhaps through 1099 forms or direct deposits.
Bank Statements or Investment Accounts
Lenders will validate your bank statements to understand better the risks of lending money. They like to see there is ample cash on hand in the event of a financial emergency.
Lenders also want to know if your down payment funds are “seasoned.” In other words, they want to ensure the money wasn’t just added to your account from a third party.
Your Credit History is Essential
One of the most crucial aspects of getting a home loan is your credit score. A good credit score provides borrowers with the best interest rate and terms.
Before applying for a mortgage, you should always strive to raise your credit scores. Some companies, like Credit Karma, can help you do that quickly. The best part is it’s free.
Lenders will pull your credit report to find out what your credit looks like. Sometimes credit reports have mistakes. If you find yourself in that position, you’ll want to get them fixed immediately.
When you have past credit issues, lenders will ask you to document why they happened. Sometimes it is just a one-off circumstance. Lenders want to know this.
Knowing there are minimum credit scores to buy a house is essential.
Your Rental History
More lenders are looking at a potential buyer’s rental history. Seeing rental history provides them with whether or not you’ve been paying your rent.
Lenders ask for canceled rent checks you paid your landlord. They may ask the landlord to help verify if you cannot produce the checks.
Final Thoughts on What a Lender Needs From a Borrower
Hopefully, all the documentation needed to get mortgage approval from a lender has been helpful. Getting a mortgage is a big step in the home-buying process.
If unsure of anything, asking your lender mortgage questions is always wise. Always understand anything you’re signing.
Getting yourself organized well in advance is one of the things I recommend doing before buying a home. Those who are well prepared have less stress and an easier time buying a house.
Once you have your pre-approval, you’ll want to make sure you don’t do anything that will get your mortgage approval taken away, like buying a new car.
Many buyers do not realize how much purchasing a car while buying a home can impact their finances.
After being in the real estate business for thirty-seven years, I have seen a few people make this mortgage mistake. Don’t be one of them!
Hopefully, you have found this information helpful on what you need to give a lender to get mortgage approval.
Additional Helpful Home Buying and Selling Resources
- Things a buyer’s agent does for you – see an extensive review of why hiring a buyer’s agent to represent your best interests makes so much sense. A buyer’s agent is your trusted advisor throughout a real estate transaction.
- First-time buyer tips from numerous real estate pros – see a comprehensive guide to buying your first home with twenty-five exceptional tips from real estate pros across the country.
The above resources offer some terrific advice from real estate agents who know their craft. Use the information to make solid decisions.
About the Author: The above Real Estate information on documents for a mortgage for each home loan type was provided by Bill Gassett, a Nationally recognized leader in his field. Bill can be reached via email at billgassett@remaxexec.com or by phone at 508-625-0191. Bill has helped people move in and out of many Metrowest towns for the last 37+ years.
Are you thinking of selling your home? I am passionate about real estate and love sharing my marketing expertise!
I service Real Estate Sales in the following Metrowest MA towns: Ashland, Bellingham, Douglas, Framingham, Franklin, Grafton, Holliston, Hopkinton, Hopedale, Medway, Mendon, Milford, Millbury, Millville, Natick, Northborough, Northbridge, Shrewsbury, Southborough, Sutton, Wayland, Westborough, Whitinsville, Worcester, Upton, and Uxbridge MA.
