Complete Checklist of Documents Needed for a Mortgage

When you’re buying a home, gathering the paperwork for your mortgage before you apply is a good idea. Tracking down documents can take time, but doing it before you need them could help you get to the closing table faster.

You will owe your lender a stack of documents once you apply — and during underwriting — that show you can repay the loan. A mortgage application typically requires a paper trail to verify:

— Income and employment.

— Assets and debts.

— Credit history.

— Identity.

— Rental history.

— Other information, such as divorce, bankruptcy or gift funds.

[Read: Best Mortgage Lenders.]

Mortgage Application Information

The first step in applying for a mortgage is completing a standardized form called the Uniform Residential Loan Application. Each borrower has to complete this form, which asks for personal and financial details. Lenders use this application to determine your eligibility for a mortgage.

The application “is step one, where a borrower is just saying, ‘Here’s what I’m telling you about me,'” says Jeff Checko, a real estate broker with The Ashton Real Estate Group in Nashville, Tennessee. “That quickly graduates to where the bank says, ‘OK, now we need you to show us with documents that support that application.'”

Income Verification

The lender will request a few documents to confirm that you can pay back the amount you want to borrow.

When lenders check a borrower’s income, they’re “looking for stability and consistency” to make sure the borrower can afford the mortgage payments, says Mark Zihmer, vice president of mortgage lending at CrossCountry Mortgage.

Here’s what you will need as proof of income:

W-2 forms. Your mortgage lender will likely ask for W-2s from the last one to two years for each applicant. If you don’t have them, check with your employer or ask the IRS for copies of the documents you submitted with your tax returns.

Pay stubs. Lenders typically ask for pay stubs from the last 30 days and may require your employer to sign them. Pay stubs may be available in paper or electronic form. If you receive other types of payments, such as overtime or commission, you’ll also need to produce documents for them. A W-2 form or pay stub may show how much you’ve earned for this income.

Income tax returns. Lenders will check your tax returns from the last two to three years to verify the income you reported and the deductions you claimed. You might need to provide copies of the returns along with IRS Form 4506-C, which permits the lender to obtain your tax transcript.

Alimony or child support documents. If you rely on this type of income, then you must show proof that you will continue to receive payments for at least three years after the date of the mortgage application. A copy of the court order may be acceptable.

For s elf-employed workers, freelancers and independent contractors, most lenders require at least two years of steady self-employment in the same industry. You can show this with contracts or letters from current clients, or if you own a business, you can provide your business license or proof of insurance. The lender may ask for at least two years’ worth of federal tax returns, both personal and business, plus a cash-flow analysis form and a year-to-date profit and loss statement signed by a certified public accountant.

[Read: Best Mortgage Refinance Lenders.]

Assets and Debts

Lenders check your debt obligations to calculate your debt-to-income ratio: They’ll want to make sure you have the assets to be financially sound after paying the down payment and closing costs. You will list on your mortgage application all monthly debt payments — auto and student loans, credit cards, existing mortgages — and assets, such as bank and investment accounts.

Your lender may ask for these documents to support your assets and debts:

Bank statements. Your mortgage lender will check that you can cover your down payment and closing costs, plus maintain cash reserves, if required. You can typically submit two to three months’ worth of bank statements to show your balance.

Depending on how you’ve set up your account, you might get these statements in the mail, or you can download copies of them online. The lender will want documentation explaining the source of any large deposit.

Retirement and investment accounts. If you plan to use money from a retirement or investment account to cover your cash to close, then you will need to supply two to three months’ worth of statements from those accounts. That includes individual retirement accounts, 401(k) plans, stock investments and certificates of deposit. Submit every page, even blank ones.

Gift letter if using gift funds. Some loan programs allow you to use financial gifts from family members to cover your down payment. A relative who plans to give you money for this purpose will need to sign a gift form confirming that repayment is not expected. The lender may also ask for a copy of the donor’s bank statements to confirm the source of the money.

Credit Verification

Having your credit checked is a big part of applying for a mortgage, though you won’t actually submit copies of your credit reports. Instead, the lender will ask for your permission to check your credit history.

“Certainly, some dents and scratches don’t prohibit buyers from obtaining a loan,” Zihmer says.

But if late payments, collections, judgments or other derogatory marks show up on your credit reports, the lender may ask for a letter that explains these items.

The lender will also check your credit score, and your score will influence your interest rate.

For every loan program, Checko says, “There’s a minimum credit score that you’ll need to qualify. The interest rate is on a scale corresponding to your credit score.”

Generally, having a higher credit score will mean getting a lower interest rate.

Other Records

The lender may ask for additional mortgage documents, depending on your situation:

Signed copy of the purchase and sale agreement. This is the document you and the seller created. It shows the purchase price and other details about the home you’re buying.

Rental payment history and references. If you’ve been renting, then you may need to provide proof of payments for the last 12 months, such as canceled checks, plus contact information for landlords for the last two years.

Divorce decree. Find a copy of your divorce decree, which shows whether you have to pay child support or alimony.

Bankruptcy or foreclosure records. Ask your lender how long you’ll need to wait before reentering the mortgage market if you have one of these on your credit history. With a bankruptcy, the lender may ask for proof that your debts have been discharged and are no longer outstanding. For a foreclosure, you may have to wait seven years before you’re eligible for a new mortgage and provide proof that the deed to the property was transferred.

ID for noncitizens. Although you don’t need to be a U.S. citizen to get a mortgage, your lender may ask about your permanent residence and immigration status. You may need to provide the lender a copy of your green card, employment authorization document or an approved visa. As with any borrower, the lender wants to verify that you reasonably expect to earn income.

Alternative data to help a thin credit file. If you have little or no credit history, the lender will want to see a proven history of paying creditors as agreed. For credit scoring, the lender could leverage alternative data, such as the borrower’s utility, cellphone, rent, cable TV and other regular bill payments.

[Read: Best Adjustable-Rate Mortgage Lenders.]

Summary: Documents Needed for Mortgage

As you go through the checklist, find each document and start organizing the files.

Scan paper forms, label them with a consistent naming convention and save them in a folder on your desktop. You may even be able to use your smartphone to scan documents and create PDFs straight from your phone.

But if you plan to submit paper documents to your lender, make copies of them so you don’t hand over originals, and keep them in one folder or envelope. You’ll be able to quickly produce them from one central location when your lender asks for these mortgage documents:

Mortgage application information

— Details about the type of mortgage you want.

— Information about the home you plan to purchase.

— Basic identification information for each borrower.

— Employment information for the last two years.

— Monthly income and household expenses.

— A list of your assets — what you own — and your liabilities — what you owe.

— Details about the home transaction, such as the purchase price.

— A declaration of any legal issues that may affect your financial situation.

— Your signature, which confirms that the information you provided is true and accurate.

— Optional information for government monitoring purposes.

— Purchase contract signed by all parties.

— Government-issued ID.

Income verification

— Two years’ worth of W-2 forms.

— 30 days’ worth of pay stubs.

— One to three years’ worth of income tax returns.

— Signed and dated IRS Form 4506-C.

— If self-employed: business and personal income tax returns, signed profit and loss statement, and list of all business debts.

Assets and debts

— Two to three months’ worth of statements for all accounts listed on the application, such as bank and investment accounts, credit cards, and student loans.

— Documentation for any large deposits on asset or bank statements.

— Judicial decree or court order for each obligation due to legal action.

Credit verification

Letter of explanation for late payments, collections, judgments or other derogatory items on your credit reports.

— Bankruptcy and discharge papers.

— Thin credit file: payment history for utility, cellphone, cable TV, car insurance and other bills.

The actual list of documents your lender requests may vary, depending on the lender, the mortgage you want and your financial situation. Ask the lender for a list of paperwork you might need to provide, and start collecting it before you begin the application process.

Having everything ready from the get-go will help you close on the home with less stress.

More from U.S. News

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Complete Checklist of Documents Needed for a Mortgage originally appeared on usnews.com

Update 08/13/21: This story was originally published on an earlier date and has been updated with new information.

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