Home Jersey sale What documents are needed for a mortgage loan application?

What documents are needed for a mortgage loan application?

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  • Lenders must review your income, assets, credit and debt before qualifying you for a mortgage.
  • Be prepared to provide pay stubs, W-2 forms, tax returns, bank statements, and any other documentation that proves you have the ability to repay the loan.
  • Having your documents ready in advance can help the process go more smoothly.

Getting a mortgage requires a lot of documentation. To make sure you can afford to repay the money you borrow, your mortgage lender will comb through your financial history.

This means that you will be asked to provide plenty of evidence that you have sufficient income, credit, and assets to qualify for a loan. Having all of these documents ready in advance can help make this process smoother.

“While the process of submitting documents to process your loan may seem laborious in today’s fast-paced and competitive home buying market, the documentation you submit for the underwriting process may have a major impact on the time it takes to process your loan,” says Michael Innis-Thompson, Head of Lending and Community Development at TD Bank.

In a market where sellers often receive multiple offers, being prepared and responding quickly when your lender asks for documentation can give you a competitive edge, Innis-Thompson says.

“The most prepared buyers – those who have their papers in order and can easily close a contract – are the most attractive to sellers,” he adds.

What documents are needed to apply for a home loan?

The exact documents your lender will ask for depend on your situation. Self-employed borrowers, for example, will need to provide different documentation than those who receive a W-2 as a full-time employee.

You may not have to dig up all these documents yourself. Some lenders have technology that can extract certain information on your behalf.

Here is a list of some of the most common items


mortgage lenders

ask. If you are borrowing with someone else, such as your spouse, remember that you will both need to provide these items.

Identification

To confirm that you are who you say you are, your lender may ask you for identification, such as a driver’s license.

proof of income

Lenders want to make sure you have a stable and predictable source of income. To prove this, some of the documents you may be asked for include:

  • A month of payslips
  • Two years of W-2 or 1099
  • Two years of tax returns
  • Statement of cumulative profit and loss (if you are self-employed)
  • Verification of alimony or alimony payments (including a copy of the legal agreement or court order outlining the terms of those payments and proof that you received them)
  • Social Security Award Letter
  • Documentation verifying any other sources of income you wish to use to qualify

Bank statements and other proof of assets

When you take out a mortgage loan, you usually need to have some money on hand to


deposit

and


closing costs

. Your lender may also want you to have extra funds that could be used to cover your payments for a few months if you were to suddenly lose your job. These funds are called reserves.

To prove that you have the cash to close and cover reserve requirements, you will likely need to give your lender:

  • Two months of bank statements for your current and savings accounts
  • Two months of statements for all investment accounts you have, including retirement savings
  • Any other statements documenting the assets you will use to qualify or affect your down payment or closing costs
  • Gift letters documenting the receipt of gifts from family or friends towards a down payment

Checking your debts

Getting approved for a mortgage doesn’t just depend on how much money you have in your bank or how much you earn each month; how much money you spend each month on debts and other obligations also plays a major role in your ability to qualify for a mortgage.

Lenders can gather much of this information by looking at your credit file. But you may need to provide additional documentation for certain obligations, such as your student loans or any alimony or child support you are required to pay.

Rental history

If you are a current tenant, your lender may want proof that you have a history of paying your rent on time. Be prepared to provide information about your rental history for the past year. This may include presenting canceled rent checks.

Other things your lender might need from you

  • Authorization to manage your credit
  • Social Security number
  • Certificate of Eligibility, if applying for a VA mortgage
  • Documentation surrounding prior negative credit events, such as foreclosure or bankruptcy

Why do I have to present so many different documents to obtain a mortgage?

Most mortgage lenders are required to do their due diligence to make sure you can afford the loan you take out. This is called the ability to repay rule.

To comply with the ability to repay rule, lenders must document your income, assets, employment, credit history, and monthly expenses, according to the Consumer Financial Protection Bureau.