Necessary Mortgage Documentation

When you apply for your mortgage, you need to prove your income, employment and residency status, and countless other things. Mortgage lenders love documentation and they ask you for tons of it.

This page:

  • Lists the most common documents banks require

  • Explains the importance of each to the lender

  • Begins to explain how certain requirements can be avoided

This section concludes our mortgage planning guide. In case you missed it, it lays the groundwork for an easy home loan process and covers important topics about fixing your credit, timing mortgage interest rates and managing your investment.

Proving and yourself to your mortgage lender.

Bankers are bureaucrats, and they love paper. You have to provide them with lots of it to prove that you are an acceptable credit risk.

For those who are self-employed or unable to provide ideal documentation for some other reason, there are low-documentation loans available, which (surprise!) usually carry higher interest rates or unfavorable conditions.

Also, if your credit is really good or your income really large, you are able to apply for an express mortgage and waive all but the most basics documentation requirements. These type of loans don't cost more in terms of interest, but, honestly, few people qualify for them.

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With just a little information, you can get pre-qualified in minutes at one of our recommended lenders. If your credit is good, Eloan guarantees the lowest interest rates in the country, and for those with so-so credit, FullSpectrum Lending specializes in credit-building sub prime mortgages.

So what documents do most applicants need to qualify?

In most cases, an expectant home buyer should be prepared to provide the following:

  • Federal income tax returns from the previous 2 years. If you've filed an extension for the last tax period, have a copy of that and of the tax returns from the previous 2 years. Also W-2's from the previous two years, if applicable. This is an obvious one: the lender wants to see that you've had a steady income in the past.

  • Recent paycheck stub, with your name, Social Security #, employer's name and address and year-to-date earnings. If you're self employed, a year-to-date profit and loss statement. If you've been with your current employer for fewer than five years, you may also need a list of names and addresses of previous employers. This proves your current income and employment status to the lender.

  • Documents that show any other sources of income. This includes documentation from second jobs, overtime, commissions, bonuses, Social Security payments, retirement or veteran's benefits, alimony, and child support. If you have extra sources of income, good for you. Your lender likes them too.

  • Investment and Asset records. These should show income from dividends and interest, mutual fund statements, stock certificates, real estate and automobile titles, and any other investments. This goes towards documenting net worth.

  • Checking and Savings account information. This includes the names of the institutions and branches and account numbers. Recent statements are ideal. Again, proving that you have cash flow is crucial.

  • Housing information. If you currently rent, a copy of your lease and canceled checks that show rental payments along with the landlord's name and address. If you've been at your current address for fewer than two years, you may need to provide a list of previous landlords and their contact information.

If you currently own, you need a copy of your current mortgage, information about the lending institution, the property's current value and debt owed on it. This is of major importance to the lender, because, in a sense, they are becoming your new landlord. They want to see your previous payment history. Housing expenses are also a major component of debt-to-income ratios.

  • A complete list of your current creditors. This includes banks, savings and loans, credit card companies, student loan sources, etc. Statements giving your balance and monthly payment amount are ideal. These go towards establishing your credit profile and are used in addition to credit reports and credit scores.

  • Housing expenditures information. Utility bills, insurance, cable, phone bills, etc. Again, these show how you treat housing related expenses, and are used to calculate debt-to-income ratios.

  • Bankruptcy information. If you've declared bankruptcy in the past seven years, you need a copy of petition and discharge, a handwritten explanation of the reason for the bankruptcy, and evidence of good credit behavior since then. Having declared bankruptcy in the past may not necessarily keep you from getting a mortgage, although you may need a sub-prime mortgage.

  • Copy of the home sales contract. If you've already decided on a new home and negotiated with the seller, you need a copy of the final contract listing the price you've agreed to pay. This shows the lender exactly how much you need to borrow rather than making a guess.

You may not need every piece of information listed, but it's a good idea to be prepared, just in case. Closing a deal quickly can mean substantial savings for you.

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