To prove you are in a position to afford a home loan repayment, mortgage lenders require various documents. Here is a complete checklist of documents needed for a mortgage approval.
Pay Stubs, W-2s, and Other Proofs of Income
Lenders need to verify your identity and social security number before lending you money. Additionally, they need to confirm you have a reliable source of income to afford mortgage repayments. Therefore, be ready to provide your original pay stubs and W-2 forms to prove you are employed. If you are self-employed, you must provide proof through 1099 forms or bank statements showing direct deposits.
Mortgage lenders want to get a clear overview of your financial health. Checking your tax returns allows them to verify your income is consistent with your reported earnings. Some lenders request that you provide copies of your tax returns. Others request you to sign the form 4506-T form, which allows them to request a copy of your tax returns from the internal revenue service (IRS).
Mortgage lenders assess you as a borrower through credit verification. The lenders won't require you to submit credit reports and scores when applying for a loan. Instead, the lender will ask you for permission to access your credit history. However, going through your credit report in advance is important to help you see potential roadblocks and fix them before the evaluation.
If your friend or family is helping you buy a house by giving you money, you require to provide a gift letter. This is written confirmation of their relationship with you and the amount of money they give you. Additionally, the letter should confirm the money is a gift and not a loan.
Bank Statements and Proof of Assets
To evaluate whether you are at risk, mortgage lenders check your bank statement and other assets. This includes your investment assets and your life insurance cover. These documents prove you have several months of reserve mortgage repayments as a backup in case of an emergency.
Your Renting History
If you do not have a credit history, most mortgage lenders request checks indicating your regular rent payments. Therefore, your renting history is important to prove you can pay on time.
Mortgage Specific Documents
Some mortgage lenders require you to undertake home buying education to qualify for a loan. Others demand a certificate of eligibility. Consult your mortgage lender in advance to know what specific documents are required.
For a smooth mortgage application process, ensure the above documents are in order. In addition, take note of how you obtain each of these documents, as you may be required to provide updated documents before your mortgage is processed.
25 April 2022
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