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What Paperwork is Needed to Apply for a Home Mortgage Loan?

By on March 7, 2014 in Mortgage

What Paperwork is Needed to Apply for a Home Mortgage Loan?Buying a home is a massive endeavor that results in you spending hundreds of thousands of dollars in principal and interest payments over 15 or 30 year terms of a mortgage. It is not something that you should take lightly.

Likewise, if the bank is going to hand over a check with six figures in it they are going to make sure they know what the odds are of your ability to pay the loan back.

That’s why when you go to apply for a home mortgage loan the stack of paperwork literally a few inches thick. Save yourself some headache by gathering the appropriate documents before you apply for a loan.

Paperwork Needed to Streamline Home Mortgage Application

Getting pre-approved for a specific mortgage amount will make your home search a lot easier than by skipping pre-approval. When a lender pre-approves you for a loan they give you a stated amount you are allowed to spend on the home. This keeps you from getting your hopes too high about the McMansion down the street.

As you’re going through the pre-approval process for a mortgage, the bank, credit union, or mortgage broker is going to ask you for a ton of documentation in order to make a decision on your credit worthiness for the loan. Here’s an idea of what you need to have ready:

Recent Pay Stubs

First, the lender wants you to show them you are working consistently. You will likely need the last 1 to 3 months of your pay stubs as well as documentation showing your Year-to-Date earnings from your employer. This information is critical in showing the lender you are capable of repaying the loan.

Income Tax Returns

Likewise, the lender wants to see the last 2 or 3 years of income tax returns that you sent to the Internal Revenue Service. This gives a larger snapshot of your income and any drastic changes in income will need explanation.

Bank Statements

The bank wants to know how much money you have on hand, and where you keep it. Most lenders want at least the most recent bank statement for each account you have. The idea is to figure out how large of an asset base you have that could be used to either keep you current on the loan or pay off the debt.

Investment Account Statements

Likewise the lender wants to see what kind of money you have in investment accounts that could be used to pay off your loan in a financial pinch.

Any Debt Balance Statements

On the other hand, the lender needs to know who else you owe money to. If you have $100,000 sitting in a savings account, but have $120,000 in credit card debt, then the assets you listed earlier in your application are truly liabilities. The bank needs to know how far you’ve stretched yourself financially.

Explanations of Issues

Any issues that arise will need to be addressed before moving forward. You can greatly decrease the amount of frustration you have by getting all of your documents together and sending them in all at the same time. On your bank accounts note any random deposits of cash or check and explain where the money came from. Lenders want to know that someone didn’t lend you a bunch of money just so it looks like you can afford a loan, only to give the money back after you buy the home.

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