Get a Head Start: Documents Needed to Apply for a Mortgage

Compiling all the documents you need is one of the most stressful aspects of applying for a mortgage. The sheer amount of time this takes can drag out the loan application process. Be prepared by gathering the most important documents you’ll need together now to make the mortgage application process easier. Plus, you’ll need some of these to get a mortgage preapproval letter when you put an offer on a house.

Proof of Identity

Given you’re working with personal financial details, mortgage lenders need to verify you are who you say you are. They will need identification such as a Social Security card, government-issued ID like a driver’s license or passport, marriage licenses, or birth certificates. Non-citizens may be required to show proof of holding a green card.

Income Verification

Underwriters first verify that your income stream can afford the monthly payments associated with the loan amount. That makes proof of income and employment history one of the most important parts of a mortgage application. This includes several documents. If you are self-employed, you must show your income through a 1099 form, tax return, or a direct deposit through bank statements. A profit and loss statement and a list of your business debts will also help a lender understand your financial situation. It helps your case if you have been self-employed for at least two years.

If another party employs you, W-2s and pay stubs should do the trick. You’ll want the pay stubs to go back at least 30 days and W-2 forms to go back at least two years. These monthly income documents show your lender that your financial situation is stable.

The underwriter may request additional documents based on the transactional history in your account. Say you have a large one-time deposit that’s an inheritance; you’ll need the additional documentation showing it was bequeathed money. 

Tax Returns

Federal tax return documents give your lender a complete picture of your financial situation. You should expect to sign Form 4506-T, which allows the lender to ask the IRS for a copy of your tax returns. Most lenders will want two years’ worth of returns when applying for a mortgage. Personal income tax returns verify your reported annual income and employment status over the previous months.

Bank Statements

If you have investments, your lender will need to know about them. This shows you have adequate savings and assets to help with your down payment, closing costs, and mortgage payments. Lenders want to see what you currently have in your accounts to evaluate cash-on-hand. They want proof of assets in case you default on the loan, including any investments like mutual funds, 401(k)s, IRAs, insurance and life insurance assets.

Alimony and Child Support

Employment may not be your only source of money. If you’re receiving alimony or child support, you must show the lender documents like a divorce decree proving this. Alimony and child support payments could be the difference between getting and not getting your mortgage approved. And if you’re the payee, child support documents are part of calculating your debt-to-income ratio.

Credit Documents

The lender will usually request a credit report, which goes deeper into your credit history than just the credit score. To do so, they will need your permission, sometimes in writing, to access your credit score and payment history. If you have a bad credit history, such as a short sale, late payments, or foreclosure, be prepared to explain in writing what happened and how your financial situation has changed.

This aims to make the lender feel better about the risk of lending to you. If you have a bankruptcy in your past, you will need bankruptcy/discharge papers. For multiple bankruptcies, you’ll need one document for each.

Rental History

If you’ve only rented up until now, showing that you’ve paid your rent on time is a great way to show your reliability to your lender. Provide your lender with documents showing your renting history as evidence that you have consistently made payments on time.

Debt Obligations

Mortgage lenders assess if you carry too much debt and, therefore, are a risky borrower by evaluating all your debts and assets. They may request statements on your current mortgage, student loans, auto loans, or lines of credit. They will also assess your credit utilization and determine if you make on-time monthly debt payments.

Gift Funds

Sometimes your loved ones may want to help you purchase your home. The lender will need a gift letter explaining they are gifting you funds for a down payment. They should include their relationship to you and confirmation that the money is merely a gift and does not need to be paid back.

Apply for Your Mortgage with a Mortgage Professional

This can seem overwhelming, but working with a helpful and trustworthy lender will make it easier. Final mortgage approval can take anywhere from two weeks to over a month. Having the documents ready before your purchase offer is accepted starts the ball rolling on the mortgage process. Feel free to ask as many questions as you need to. We are here to support you through the mortgage application process!

FAQs

What are mortgage lenders looking for in the documents needed to apply for a mortgage loan?

Your lender is verifying a few details to ensure that it meets the lender requirements for the loan. Then, they want to check that you are a low-risk borrower and that they will make a return on their investment in you. To that end, they want to see:

• A history of a steady income
• Reliable and documented income sources
• Sufficient income to afford monthly mortgage payments
• Several years of financial history showing you meet your financial responsibilities

Updated November 2024

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