I’m Ready to Apply for a Mortgage! What Documents Will I Need?

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Embarking on the journey to homeownership can often feel like preparing for an expedition — excitement intertwined with the challenge of gathering all the necessary provisions. In this case, the provisions are the documents needed for a mortgage application, each one a critical piece of the puzzle that, when correctly assembled, unlocks the door to your future home.

Understanding this paper trail is crucial, as it is the language through which you communicate your financial story to lenders. In the upcoming guide, we’ll unpack the list of documents you’ll need to fortify your mortgage application, ensuring you step into the lender’s office with confidence.

Welcome to the first chapter of your home-buying saga — where preparation meets opportunity.

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Why so many mortgage application documents?

The purpose of the mortgage application and underwriting process is for lenders to ensure that you are someone who can afford to pay the money back over the life of the loan. They generally make this determination by looking at your mortgage application information, proof of income, assets and debts, credit verification, and a variety of other documents.

The Consumer Financial Protection Bureau reported that approximately one in nine loan applications to buy a new house (9.1%) were denied in 2022. Of those who receive approval, 3%-4% typically became delinquent on their residential mortgage payments.

When your loan documents are in order, you’re better equipped to get through the underwriting process and avoid being part of the delinquency rate statistics.

Mortgage expert and underwriter April Wise says that your mortgage application documents help lenders establish the four Cs: “There’s credit, capacity, capital, and collateral.”

What documents do I need for my mortgage application?

Experienced real estate agent Adam Howell, who works with 69% more single-family homes than the average Rochester agent, emphasizes that the most important thing is that you are able to make the monthly mortgage payment. Lenders gauge this by looking at a combination of your income, your debt, and how much credit you already have.

Here are the documents you will likely need for a mortgage application:

1. The application itself

Submitting the mortgage application gives the lender details about you and the house that you want to finance. This is the first step to qualify for a mortgage.

2. Your ID

The lender will need to know that you are who you say that you are. That means you’ll need to show a form of ID. Federally accepted forms of ID, such as your driver’s license or passport, will work.

3. Proof of income

How you should demonstrate proof of your income depends upon your specific situation.

If you work for an employer, this might be a pay stub or a W-2. If you are self-employed, you might use a profit-and-loss statement or your 1099 forms.

“We usually need one pay stub — recent pay stub — within thirty days of your mortgage application and at least the last year’s W-2,” explains Wise. “On some occasions, we’ll ask for two years of W-2s, but for the most part, most borrowers get by with just one.”

Hourly workers who receive overtime, commission, or bonuses should submit year-end pay stubs from the past two years to average.

If alimony or child support is part of your income, you’ll need to show a history of how regularly payments are made and the amount. The same thing goes for pension, Social Security, or disability income.

4. Tax returns

Lenders want to ensure that your annual income matches your reported earnings (using pay stubs), so they will generally ask to see up to two years of tax returns.

Additionally, you’ll need to fill out and submit an IRS Form 4506-T to allow the lender to confirm your tax history with the IRS.

5. Bank statements

Lenders will want to verify how much money you have saved for a down payment, closing costs, and what lenders refer to as “reserves”, i.e. sufficient savings to cover at least two months of your expenses over and above your down payment.

When sending your bank statements, be sure to send the complete statement. If it’s five pages, don’t just send the first page, even if it includes a summary.

Account balances are great, but the statements need to show all activity for the most recent two months in order for those funds to be used to buy a house.

Additionally, Wise shares that lenders cannot accept any bank statements with redacted information. She explains that it’s better to leave things as they are rather than lining through them. In her experience, she says that if you initially line through items on your statement, it will likely be looked at more closely when it’s received without the lines. It simply needs to be kept as it came straight from the bank.

6. Retirement or investment account statements

If you are retired, you need to show proof of any retirement income. According to Wise, the best way to do so is with an award letter. An award letter is one that either the Social Security Administration (SSA) gives you, or that can be provided by the retirement fund that you’re using. The letter shows how much you’re getting paid every month.

As far as personal retirement accounts, stocks, and other investments you’ve made that you want to have considered in your income — you will have to show the lender your investment accounts. This may include showing copies of your stock certificates and records, investment or securities accounts for the last three years (or before the last three years if significant gains were made).

7. Gift letters

Will all or part of your down payment come from a gift? If your family or friends assist you by giving you money to help you buy the house, you’ll need a letter to prove it is a gift and not a loan. Your gift letter should state the gifter’s relationship to you and the dollar amount of the gift they provided.

8. Rent history

If you are renting your current home, your lender might ask to see a year’s worth of canceled rent checks (showing they were cashed) or other proof of payment to demonstrate that you have been responsible with your monthly expenses to show you are more likely to make your mortgage payments on time.

Lenders may also ask for documentation from your previous landlord to prove the same. If you don’t have a lot of credit history, your renting history will become much more significant.

9. Credit report

The lender will pull your credit report themselves, so you don’t actually have to provide it. However, you will have to sign a document giving them permission to access it.

For a conventional mortgage, the minimum credit score is 620 to buy a house (assuming there are no mortgage overlays in place).

The minimum credit score for an FHA loan is typically 580. If you are able to put 10% down on a home, the FHA minimum can be as low as 500. USDA loans have no minimum credit score requirement, but most of these service lenders will require you to have a 640 or higher.

10. Letters of explanation

A lender is looking to give mortgages to those who have good credit, as it reflects your level of responsibility when it comes to making payments for things on time. If you have any “dings” on your credit report, you may need to supply a letter of explanation.

Your letter of explanation should include:

  • The date
  • Your lender’s name
  • Your lender’s mailing address and phone number
  • A subject line with “RE:” that includes your name and identifying information
  • Your full legal name (should be the same as on your mortgage application)
  • Your partner or spouse’s name if they are also on the application
  • Your full mailing address
  • Your phone number
  • At least one paragraph sharing detailed information as asked of you by the lender

Be sure that you do not include irrelevant information and keep your letter short and straight to the point. Finally, be sure that you are clear and professional but also include as much detail relating to the specific issue as possible — remember, your lender only knows that which you’ve shared.

11. Miscellaneous documents

Lenders may ask to see other records relevant to your specific situation, such as divorce decrees, bankruptcy and foreclosure notices, short sale paperwork, proof of immigration status, employee authorization documents, and utility bills (for those with thin credit files).

How should documents be submitted?

“It’s best if you can submit [documents] as a PDF,” says Wise. “We do get documents that are taken as pictures, for example. As long as they’re clear, they include the edge of the document, and we can read all of the words on the page, then usually a photo will suffice, as well, because we can convert it to a PDF ourselves.”

To get started collecting your mortgage application documents, start thinking about how you can prove your income, show your debt, and finesse your credit score (if possible). Do you have car payments each month? School loans? Credit card payments? Howell recommends giving yourself at least a week to gather everything together.

If you don’t have the necessary documentation available at your fingertips, (“most people aren’t good bookkeepers,” says Howell), then you’ll have to ask your attorney, your CPA, or any other professional who can help you to obtain them.

It’s critical that you disclose everything — even if you don’t think it’s important or it happened a long time ago. Your loan approval depends on it.

What happens if you fail to disclose something?

If you decide not to share something (or a piece of information gets left out by accident), it can put you back at square one with your mortgage loan. As you can imagine, this could have a big impact on the timeframe within which you can qualify for a mortgage and buy a house — or it could disqualify you completely. That’s why it’s so important to remain as detailed and candid as possible throughout the process.

Even if you have disqualifying factors, Howell says that you can still seek improvement. “I try to work with these buyers on getting things cleaned up.”

While things such as bankruptcy and foreclosure can’t be changed and can only be resolved over time, other occurrences, such as missing a couple of credit card payments, can be worked on. Howell says that he has helped buyers by working with them “where they’re at.”

It’s okay — in fact, encouraged — to ask for help

If you feel overwhelmed by the process, consider it normal. That’s why it can be really helpful to work with a qualified real estate agent who can walk you through it.

“It’s a lot of steps to consider; it’s a large purchase. I’m here to guide them and advise them through that in every step,” assures Howell. “It includes working through the mortgage application process.”

Despite the complexity often involved with applying for a mortgage, the support of an experienced real estate agent can help to make things a bit more simple.

HomeLight can connect you with the top-performing agents in your market.

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