Mortgage Pre-Approval Checklist
Mortgage Preapproval Checklist
If you are going to purchase a home, then you will need to get pre-approved from a mortgage lender.
Real estate agents and the sellers of the home will want to verify you qualify for mortgage financing to buy the home before accepting an offer you make to purchase the home.
This online mortgage pre-approval will also provide you with all the information you need to understand the financial commitment you are making when your purchase the home.
When getting pre-approved you will see the down payment requirements, monthly mortgage payment and other important details.
To simplify this task of getting a mortgage pre-approval, we’ve compiled a mortgage pre-approval checklist that will ensure everything is in order!
Getting a mortgage pre-approval is the first step on how to get a mortgage loan.
Required Documents for mortgage pre-approval
To obtain a mortgage preapproval, there are certain documents you must provide. The list of documents needed for mortgage pre-approval are standard for most borrowers. However, if the loan type is specific or your job involves an alternate profession, some additional paperwork may be necessary when purchasing residence.
1. Identification of Applicants
When applying for a mortgage, the lender has to verify that they are lending to you and not an imposter. Therefore, you will need to provide valid government-issued identification with your photo on it. A state issued ID card, drivers license, U.S alien card or passport.
2. Social Security Card
Your Social Security card is required by your lender to provide additional proof of identity and ensure that the loan funds are going directly to you. Providing your SSN to the lender allows them to accurately run a credit check.
By presenting both forms of identification - picture ID and Social Security Card- it guarantees that all processes are undertaken with accuracy and precision.
If you have misplaced your Social Security Card the lender will be able to submit a Form SSA-89 to verify your social security number.
3. Tax Documents
You will need to provide the last 2 years of IRS Tax Returns and or W2's for each borrower who will be applying for a mortgage pre-approval and loan.
These documents are required to verify the applicants and borrowers average annual income.
If you have misplaced or lost your W2's and or IRS Tax Returns the lender will be able to request a copy of your tax transcripts by completing an IRS Form 4509-T which authorizes the release of your tax information to the requesting party.
4. Pay Stubs and monthly income sources
One month of most recent pay stubs will be needed to verify your monthly income and show proof of employment.
If you receive payment via direct deposit, your employer should provide electronic copies of your pay stubs for easy access. Additionally, if necessary, you can request similar documents from your bank.
If you are paid with a paper check, it is essential that the stub be kept and can then be copied to send to your lender.
Other Income Sources
- Social Security Awards Letter
- Divorce Decree for Alimony, Child Support
- Pensions, Retirement
- Self Employed Business Income
5. Two Months of Bank Statements
You will need to provide 2 months of bank statements with all pages, even if blank. These bank statements are required to verify income deposits and verify the source of funds that will be used for the down payment you will make on the home you purchase.
If the bank statements show abnormal large deposits, borrowers are required to provide a letter of explanation to verify the source of those funds. The lender will be able to determine your Loan-To-Value based on the down payment you will make on the purchasing of a home.
6.Two Months of Investment Account Statements
If you have any of the additional asset accounts like; 401(k), 403(b), IRAs, stocks, bonds and mutual funds, then you will want to provide these documents to verify any additional funds needed for the down payment on the home you intend to purchase.
In some cases, verifying additional assets will enhance the eligibility of loan approval for borrowers who have higher monthly bills compared to their gross monthly income.
7. List Of Monthly Debts Obligations
To verify the applicants ability to repay the loan, the lender will require a list of all the applicants monthly debt payments and obligations.
The lender will evaluate your gross monthly income and compare this to your current monthly debt obligations to determine your ability to repay the loan. The lender will use Debt-To-Income (DTI) ratio to verify income and debts meet the guidelines for loan approval.
When an applicants Debt-To-Income ratio exceeds the underwriting guidelines for loan approval, applicants may submit additional asset account statements which may support loan approval with a higher debt to income.
List of Debt Payments
- Current housing expense
- Auto loans
- Credit Cards
- Annual Property Taxes
- Annual Home Insurance Premium
- Personal Loans
- Medical Bills
- Alimony Obligations
- Child Support Obligations
8. Rental History (if applicable)
If the applicant currently does not own a primary residential property and is renting. The applicant will be required to verify the last 12 to 24 months rental payment history.
To verify rental history, applicants can provide the name and phone number of the landlord, and supply cancelled checks or bank statements to verify rental payments were made on time.
9.Gift Funds (if applicable)
If a friend or family member has given you money to use as a down payment for your new home, you will need to provide an officially written letter of gift in order to prove that the money is not considered a loan.
If the down payment money is a loan, then the monthly payment amount will be included as a monthly debt obligation which will increase your debt to income ratio.
Each loan program has unique underwriting guidelines for gifting of funds when purchasing a home.
For instance, conventional loans only permit gifts from family members; however Fannie Mae also permits godparents, domestic partner relatives and former kin to provide a gift.
On the other hand, FHA financing allows contributions from employers or labor unions as well as first-time home buyer programs apart from most familial donors.
A typical gift letter must include:
- The donor's complete identity, contact details and any link to the recipient must be disclosed.
- Recipient’s name and contact information
- The amount of gift and date the gift was made
- Purpose and intention of gift funds
- Confirmation that the gift doesn’t need to be repaid
- Signatures of the donor and recipient
10. Credit Report
Unlike other documents on the mortgage preapproval checklist, you don't have to supply your lender with a credit report; upon receiving your permission, they will acquire it themselves.
Your credit report offers a peek into your history as a borrower and how responsibly you manage different kinds of debt.
It will expose any warning signs, such as delayed or missed payments, massive debts and prior bankruptcy filings.
Lenders also use this document to decide the mortgage rate they will give you on your loan and what amount they eventually approve for you.
Ahead of applying for a loan, it is wise to check your credit score for possible errors and make sure you are in an acceptable position to be approved. Although the lender will pull their own report too, being proactive can put you one step ahead.
Additional Documents Needed for mortgage preapproval on Existing Homeowners
If you're applying for a mortgage to acquire investment properties or vacation homes, and already have a home that is yours, your lender will need recent statements of the loan on your residence in order to review how much equity you possess along with the balance owed as well as what your monthly payments are.
To assess your Debt-to-Income ratio and see if you can manage an additional mortgage, the lender will ask for these documents.
This becomes especially relevant when taking out a loan on another property while still owing one on the current home.
Additional Documents Needed for mortgage preapproval on Self-Employed
If you're a business owner or self-employed, lenders usually require your tax filings and past 1 to 3 years of business returns as part of the loan application process.
In order to be considered, you'll need to furnish your year-to-date audited Profit and Loss statement.
If that is not possible, a valid alternative would be an unaudited P&L statement plus the most recent 60 days of business bank statements.
Additional Documents Needed based on VA Loan Program preapprovals
The documents identified above are the commonly required items for FHA, Conventional and non-conventional loans.
Some loan programs have minor additional items needed for final loan approval.
- DD Form 214: To authenticate your military retirement or separation, it's necessary to present a DD Form 214. If you're the surviving partner of a veteran, then provide their DD Form 214 along with your marriage license and spouse's death certificate.
- Retirement Points Statement (NGB Form 23): This questionnaire verifies the number of valid years of service in the United States Army National Guard, including both drills and educational programs. It is required to be completed by all discharged members.
- Statement of Service: Confirming active-duty military status or National Guard/Reserve membership, a Statement of Service should be printed on official letterhead and include the service member's complete name, birthdate, Social Security number (SSN), date they began duty and any time lost. Additionally, it may contain factual years served in the armed forces, activation date & orders activated along with training information plus their commander’s signature for authentication.
The Bottom Line: Mortgage Pre Approval Check List
As a lender, it's critical to ensure borrowers can pay back their loan without any risks. To make this possible, they'll need to confirm the borrower's income, assets and debt.
For an efficient process throughout your home buying journey, we recommend you have all these documents ready when beginning the process.
Being prepared with every piece of information required by lenders beforehand, you'll be able to take that important next step on your homeownership adventure!
