Anchiy/GettyImages; Illustration by Hunter Newton/Bankrate
Key takeaways
- In order to preapprove you for a mortgage, a lender will require documentation of your credit and financial situation.
- Bank statements, tax returns and pay stubs are some of the documents typically required for preapproval.
- The documentation helps the lender decide how much to offer you.
Before you buy or refinance a home, you’ll want to apply for preapproval, a statement of how much a lender might be willing to lend you. To figure that out, your lender will ask for a series of documents describing your financial situation. Getting these documents in order before you apply can help the process go more smoothly.
Mortgage preapproval checklist
| Pay stubs from at least the past 30 days | |
| Tax returns, including W-2s, from the past two years | |
| Bank statements — including checking, savings and money market accounts — from the past two months to three months | |
| Contact information of employers in the past two years. Some employers have an employment verification phone number lenders can call. | |
| Business records, if self-employed | |
| Evidence of other income, such as bonuses, child support or alimony, disability benefits, pension payments, or Social Security | |
| Account statements for 401(k)s, IRAs, CDs, mutual funds or other investment or retirement vehicles from the past two to three months | |
| Down payment gift letter, if applicable | |
| Information on other real estate, if you have multiple properties | |
| Loan statements — auto loans, credit cards, personal loans, student loans and others— from the past 60 days | |
| Credit reports and scores, retrieved by the lender with your authorization | |
| Rental history, including contact information for landlords and proof of rent payments, such as canceled checks or paid receipts | |
| Driver’s license, Social Security card or other form of ID | |
| Recent residence addresses and tenure at each |
Documents for mortgage preapproval
Employment and income
Before a lender will grant you a mortgage, it must confirm that you can repay it. That means you must provide evidence of your income and confirmation that you’ve been employed with the same company, or at least in the same industry, for two years. In some cases, it is possible to qualify with less than two years of employment history.
You’ll likely need to provide:
- Most recent 30 days of pay stubs, or 60 days if you’re paid monthly
- Tax returns, including W-2s, for the past two years
- 2 to 3 months’ worth of bank account statements
- Contact information for any employers you’ve had within the past two years. Some companies have an employment verification phone number for lenders.
- Business records, if you’re self-employed
- Proof of any other types of income, including bonuses, child support or alimony, disability benefits, pension payments or Social Security
“The lenders need to know that you have stable income that can service the mortgage payments on a regular basis,” says Alexei Morgado, founder of Lexawise, a real estate exam prep company.
Assets
Along with documenting your income during preapproval, lenders also need to document your assets. This helps a lender understand the other resources you could use to pay your mortgage if you lost your income. You may need to provide:
- 2 to 3 months of retirement account statements, including 401(k)s and IRAs
- 2 to 3 months of investment account statements
- Information about other real estate holdings, including a vacation home or rental property
- Down payment gift letters, if applicable
Debts
The amount of money you have coming in is just one piece of your financial puzzle; lenders also need to know how much of your monthly income you’re already spending on other debts. This helps them calculate your debt-to-income (DTI) ratio and decide how much you can spend on a mortgage, as well as your loan’s interest rate. Lenders will likely want the last 60 days of statements relating to your:
- Auto loans
- Credit cards
- Student loans
- Personal loans
“As part of the qualification, they will compare the monthly debt to the monthly taxable gross income to see that it meets [acceptable] debt-to-income ratios,” says Shmuel Shayowitz, president of Approved Funding. Ideally, for a conventional loan, most lenders want no more than 36 percent of your income to go toward debt payments and your potential mortgage.
Credit history
Before a lender will approve your mortgage, it will want evidence of how you’ve handled debt in the past, including whether you’ve repaid your balances and made consistent, on-time payments. Your credit profile also lets lenders see whether you’ve ever filed for bankruptcy or have any outstanding delinquencies.
As part of this review, a lender will retrieve your credit report, conducting what’s known as a hard credit check.
Identification
Confirming your identity is another element of the preapproval process. You’ll need to provide government-issued identity documents, such as a:
- Drivers license
- Social Security card
- Passport
- State or federal ID card
Additional documents needed for special circumstances
“Special situations necessitate extra paperwork,” Morgado says. “All the extra paperwork helps fill out certain types of risk that the lender will need to calculate prior to providing the applicant with preapproval.”
You might need to give your lender additional documentation if you:
- Already own a home. Your lender will want to know how much the home is worth, the monthly expenses associated with it and its occupancy status —that is, if you’re able to get any income from it. If you have a mortgage on the home, your lender will want details about that, as well.
- Are self-employed: Being self-employed doesn’t prevent you from getting a mortgage, but you’ll have to provide more documentation than a full-time employee. Lenders may require that you submit year-to-date profit and loss statements, a list of accounts receivable, 1099s or other paperwork.
- Are applying for a non-conforming or non-QM loan: These loans don’t adhere to certain federal standards for mortgages, including rules about loan size or required income documentation. You may need to meet more stringent qualifying standards — for example, if you’re seeking a jumbo loan, a type of non-conforming loan — or you may need to provide different evidence of income or credit management. This might include proof of rental property income or rental payments to a landlord.
- Will use veteran benefits: Applicants seeking a VA loan must include a Certificate of Eligibility (COE) issued by the U.S. Department of Veterans Affairs. A COE confirms that you are eligible for a VA loan.
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