What Documents Do You Need for a Mortgage Pre-Approval?

One of the most common questions asked about getting a mortgage pre-approval is the type of documents that a borrower needs to prepare. Here’s a checklist.

First things first: Do you really need a mortgage pre-approval?

The answer is no. When buying a home with financing, you are not strictly required to get pre-approved. However, when competition is tight and you’re buying in a market where you’d most likely encounter a rival for a property of interest, getting pre-approved is a big advantage than having none. Sellers generally see those who have pre-approval to be more serious buyers.

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Not only that. A pre-approval helps gauge your financial capacity to afford a home. It’s a good way to know how much budget you should prepare for the purchase.

So how do you get pre-approved?

It’s a simple, no-sweat step. The lender simply wants to verify your income and asset information as well as your employment history. Most likely, you already have the documents needed for the purpose.

Yet, if you are self-employed or have an unconventional source of income, the timeframe for preparation might take longer.

Here, we’ve gathered the most common documents that lenders require for a mortgage pre-approval, whatever type of borrower you are.

Income and Employment Documents

  • Copies of your W2 forms along with your most recent pay stubs. This is for employed individuals who generally get their income from one source. If you have income from bonuses or overtime pay, the lender may require you to include your end-of-year payroll document.
  • For those who are getting income from real estate, you need to present documents of earnings, as well as of the current market value of the property
  • For self-employed individuals, independent contractors, and freelancers, you would need a year-to-date profit and loss statements covering the most recent two years as well as the Form 1099s used when you filed your taxes and reported your income

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Asset Documents

  • Copies of all the bank accounts you are using to qualify for the loan. These account statements should show statements for the most recent 60 days, including blank pages.
  • Two months worth of statements from your IRAs, investments, and CDs accounts, including the last quarterly statement from your 401k

Debt Documents

  • A detailed list of your debt obligations. That includes student loans, auto loans, credit cards, personal loans, etc. Your debt information will be used by the lender to determine your debt-to-income ratio. That is, how much of your monthly income goes to paying off these debts.
  • Your real estate debt should be specified here. If your home is currently under a mortgage, you need to include information about the house’s loan number, its monthly payment amount, the current loan balance, the name and the address of the lender. You may also have to disclose a page of your home’s insurance policy.

What other records or documents do I need?

  • If you are currently renting, you need to show proof of your rental payments for the previous year (12 months) and include the contact information for your landlord.
  • Divorce documents may also be required including records for alimony payments
  • Lenders are strict about where you get the money to fund your down payment. If part of it is gifted, you need to show substantial proof of the down payment gifts that shows those who gave them don’t expect to be paid back.

Typically, a mortgage pre-approval can be obtained within 5 to 7 days depending on how fast you forward the necessary documents, the type of mortgage you are applying for, and the tools that the lenders use to verify your information.

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