Mortgage lenders tend to require detailed documentation. It is not uncommon for mortgage application packages to reach over 100 pages by the time all requested documents have been received.
With that in mind, here’s a quick guide to the types of documents you may need to produce when applying for a home loan. Note that this is not an exhaustive list and not all items will apply to all borrowers.
What documents are needed to apply for a home loan?
Before you start shopping for a new home, it’s a good idea to get a mortgage pre-approval. Getting pre-approved lets you know what size mortgage you can get. It also lets sellers know that you are a serious buyer.
A pre-approval involves going through the parts of the mortgage approval process that examine your personal qualifications. For example, the lender will verify your employment and income.
1. Income documents
Lenders want to know how much mortgage you can afford. To calculate this, they look at something called your debt-to-income ratio (DTI ratio). Your DTI ratio simply compares your current debt with your current income.
For this, your lender will need to see documentation of your income.
To start, most mortgage lenders want to see your tax returns for the past two years. If you have not yet filed a tax return for the most recent calendar year, your lender may ask you to do so before submitting your application. And if you live in a state with an income tax, the lender will likely want to see both your federal and state filings.
W-2 or 1099
If you are a employeeyour lender will want to see your two most recent W-2 forms.
If you are self employedthe lender will need your two most recent 1099 forms and may also request additional proof of income.
Note: General mortgage documentation requirements are more extensive for self-employed applicants. Get more details in our step-by-step guide to getting a self-employed mortgage.
Employees should be prepared to submit (at a minimum) their two most recent pay stubs. This can be a particularly important document if your income has changed significantly since you submitted your last tax return.
Other proof of income
If you have income from other sources that you would like the lender to consider, such as rental income or Social Security income, be prepared to show documents (in addition to your tax return) that check them.
Lenders also want to know your current assets: their value, location, provenance, etc. Here are some of the documents you may be asked for.
Lenders typically require two months of statements for any checking or savings accounts you have. Be prepared to write brief letters of explanation for any unusual deposits, NSF checks, or anything other than standard transactions.
When I applied for my first mortgage, I was renting a condo with a roommate. My roommate gave me money to cover his share of the rent each month. My lender asked me (and my roommate) to sign a statement confirming the source of these recurring cash deposits of $700.
RELATED: Don’t have a savings account? Check out The Ascent’s guide to the best savings accounts and see if this one’s right for you.
Investment account statements
Just like your bank accounts, you will need to produce two months of statements for every investment or brokerage account you have, including retirement accounts. If you only receive quarterly statements for certain accounts, your most recent statement should suffice.
Lenders have very specific rules about where the funds for your down payment and closing costs come from. Most lenders allow down payments, but don’t allow you to borrow money from a relative or friend.
So if you receive part of your deposit from someone else, they will need to sign a letter confirming that the funds are indeed a gift with no expectation of a refund.
If you have other assets that could help you qualify for the mortgage or that you plan to use for the down payment, be prepared to document them and their current market value.
For example, if you own a rental property, showing proof of ownership and a recent appraisal may be sufficient.
3. History of mortgage or rent payments
Naturally, your lender wants proof that you’ll meet the monthly mortgage payments on time. To verify this, they might ask you about your current mortgage (or request information about your landlord, if you’re a tenant).
Current mortgage statement
If you own a home and currently have a mortgage balance, you will likely need to submit your most recent statement showing how much you still owe on the home. This is especially true if you want to be able to close your new home before you sell the old one.
If you’re a current tenant, you’ll need to provide your landlord’s contact information, as well as documentation (such as canceled checks) showing that you’ve paid rent.
Finally, your lender will need to verify your identity and perform a credit check. The credit check will, among other things, play a role in determining your mortgage interest rate. There are several types of documents you may need to bring to your lender for this step.
social security card
In order to perform a credit check, the lender will need your social security number. Every lender I’ve dealt with has asked me for a copy of my Social Security card.
Government-issued photo ID
Expect your lender to request a copy of your driver’s license or other photo ID (like a US passport) as part of the application process.
Expect additional requests before closing
Finally, it is important to mention that it is not because your lender does not ask for a certain document at the start that he will not need it later in the process.
For example, if your lender looks at your bank statements and sees an unexplained cash deposit, you may need to submit a letter explaining the details. And there are some documents you’ll likely need closer to your closing date, like documentation of an insurance policy on the property.
The main thing is that there is a parcel documentation your mortgage lender may request, both before you apply and while you wait for closing. By preparing your documentation in advance, you can ensure that the process will go as quickly and smoothly as possible.