The Mortgage Application Checklist: Documents You Need to Prepare
Introduction
Applying for a mortgage can be a daunting process, but being well-prepared with the necessary documents can make it much smoother. This article outlines the essential documents you need to gather to ensure a successful mortgage application, covering income verification, asset documentation, personal information, and additional paperwork specific to different types of loans.
Income Verification
Pay Stubs
Recent Pay Stubs: Lenders typically require your most recent pay stubs covering the last 30 days.
Frequency: Ensure they include your year-to-date earnings.
W-2 Forms
Past Two Years: Provide W-2 forms from the past two years to verify your income history.
Consistency: Lenders look for consistent employment and income.
Tax Returns
Past Two Years: Submit federal tax returns (Form 1040) for the past two years, including all schedules.
Self-Employed: If self-employed, provide business tax returns and possibly a year-to-date profit and loss statement.
Additional Income Sources
Bonus and Overtime: Documentation of any bonus or overtime income.
Rental Income: Lease agreements and tax returns to verify rental income.
Investment Income: Statements or tax returns showing dividends and interest.
Asset Documentation
Bank Statements
Last Two Months: Provide bank statements for all accounts, showing the most recent two months.
Explanation of Large Deposits: Be prepared to explain any large deposits that are not regular income.
Investment Accounts
Stocks, Bonds, and Retirement Accounts: Statements for the last two months for any investment accounts.
Proof of Liquid Assets: Ensure these accounts show sufficient liquid assets for down payments and closing costs.
Gift Letters
If Applicable: If receiving a gift for your down payment, a gift letter from the donor will be required.
Gift Letter Content: The letter should state the amount of the gift, the donor’s relationship to you, and that the gift is not a loan.
Personal Information
Identification
Driver’s License or Passport: A government-issued photo ID to verify your identity.
Social Security Number: For credit check and verification purposes.
Residency
Proof of Residence: Utility bills, lease agreements, or property tax statements to verify your current address.
Rent Payment History: If you are currently renting, provide evidence of your rental payment history.
Debt Information
Current Debts
Credit Card Statements: Recent statements for all credit cards.
Loan Statements: Statements for any other loans, including auto, student, or personal loans.
Alimony or Child Support
Court Orders: Documentation of any court-ordered alimony or child support payments.
Payment History: Evidence of payment history for these obligations.
Property Information
Purchase Agreement
Signed Agreement: A signed purchase agreement for the property you are buying.
Earnest Money Deposit: Proof of your earnest money deposit.
Property Details
Appraisal: An appraisal report to verify the property’s value (typically ordered by the lender).
Homeowners Insurance: Proof of homeowners insurance for the property.
Additional Documentation for Specific Loan Types
FHA Loans
FHA Case Number: The case number assigned to your FHA loan.
Gift Funds: Documentation of gift funds, if applicable, must meet FHA guidelines.
VA Loans
Certificate of Eligibility (COE): Proof of your eligibility for a VA loan.
DD Form 214: Discharge papers for veterans.
Statement of Service: For active-duty service members.
Jumbo Loans
Additional Income Verification: More extensive income documentation may be required due to the higher loan amounts.
Larger Down Payment Proof: Evidence of a larger down payment, typically 20% or more.
Steps to Organize Your Documents
Step 1: Gather Income Documents
Collect pay stubs, W-2 forms, tax returns, and any additional income documentation.
Step 2: Compile Asset Documentation
Organize bank statements, investment account statements, and any proof of gifts.
Step 3: Verify Personal Information
Ensure you have valid identification, proof of residence, and a record of rent payment history if applicable.
Step 4: Document Your Debts
Obtain recent statements for all current debts and any alimony or child support orders.
Step 5: Property and Loan-Specific Documents
Prepare the purchase agreement, appraisal, and homeowners insurance proof, and gather any additional documentation required for specific loan types.
Conclusion
Preparing a comprehensive set of documents for your mortgage application can significantly streamline the approval process. By gathering income verification, asset documentation, personal information, and loan-specific paperwork ahead of time, you can present a complete and organized application to your lender. This preparation not only demonstrates your financial readiness but also helps in securing the best possible terms for your mortgage. Taking these steps will give you confidence as you navigate the mortgage application process, bringing you closer to owning your dream home.
