If you’re ready to buy your new home, there’s so much to do. The first thing to do is start searching for, and applying for, home loans. But, you need to get the right home loan documents together first.
However, which ones should you have ready to show a potential lender?
Don’t worry, as this guide has everything you need. Here are all the documents you’ll need to apply for that home loan and be ready to put the down payment down on your dream home.
Table of Contents
What Documents Do You Need For A Home Loan?
Hopefully, you’ll have all your relevant documents stashed away, ready to be brought out. Now’s the time to check that you have everything you need.
What should you be able to produce when you apply for a home loan?
Mortgage application information
When you first started looking for loans, you hopefully started by getting pre-approved for a loan. If you’ve found the loan that works best for you, you’ll now need to show that documentation.
Once you do this, you’ll be asked to fill out a Uniform Residential Loan Application form. This is what gives the lender information about each person on the loan, such as the home you’re buying, your employment history, finances, and so on.
This step is essentially you backing up the information you gave in the first step. It’s always a good idea to get pre-approval, as it shows you’ve already thought about what you can afford and how you’ll pay the loan back.
Documents about your income
Next, you need to prove that you’re making the income you say you are. This can be proved using a variety of different documents.
The first thing you need to have is W-2 forms for each applicant on the mortgage. You’ll most likely be asked for forms for the last two years, so ensure that you’re holding onto these for each applicant.
If you don’t have the copies to hand, then you’ll need to talk to your employer or the IRS. They should provide you with copies of your W-2 that you can use for the application.
Be aware that if you have any gaps in employment in the last two years, you will need to explain what was happening in that gap.
Next, you need to have pay stubs from the last 30 days to verify how much money you’ve made recently. In some cases, your employer will be required to sign them.
Be aware that if you receive other types of income, such as overtime compensation, you need to provide proof of this payment as well.
Income tax returns
Now you need to have your tax returns for the last two to three years to hand. This shows the lender how much income you’ve reported on the tax returns and any deductions you’ve made.
Ask your lender if you’ll need to send them a signed Form 4506-T, which allows them to get a transcript of your tax directly from the IRS. Some lenders will want this, so it helps to be prepared.
If you’re self-employed, a freelancer, or an independent contractor, you’ll need some additional documents as well as those above. These include profit and loss statements, up to three years’ worth of federal tax returns, a list of your business debts, and the Form 1099s you used to report income and file taxes.
Finally, there’s alimony or child support income if you receive these. To show you’re getting these payments, you’ll need a copy of the court order, as well as bank statements or canceled checks.
Credit checks
Your credit check is going to be one of the most important factors in your home loan application.
Be aware that you don’t actually send a copy of your credit score to the lender. Instead, you give permission for them to check your credit history.
To determine the interest rate you get, you’ll also need to allow the lender to check your credit score. There’s a minimum credit score you’ll need to get for each loan to qualify for it.
Remember, the better your credit score is, the better the interest on your mortgage will be. There’s a scale that corresponds with your credit score, and that’s what’s used to determine your interest rate.
If there are issues on your credit history, such as collections, late payments, and so on, you may need to send a letter that explains them. Don’t worry too much, as often these won’t stop you from getting a loan entirely.
Assets and debts
Lenders want to know that you are financially secure enough to make the repayments on your loan. To do that, they calculate your debt to income ratio to see what your financial obligations are currently.
When you apply for your loan, you’ll be asked to list your monthly debt payments, which are things like auto loans, student loans, credit cards, and so on. You’ll also need to list your assets, such as your bank and interest accounts.
Be aware that you may be asked to produce documents to prove that you have any of the above.
Bank statements are commonly asked for, as they will show your income, savings, and your down payment. You’ll usually need to give two to three months’ worth of bank statements to show this.
Remember that you can still download and print off statements online if you are paperless with your bank. If there are any large deposits, you may need to prove where they came from.
If you have any retirement and investment accounts, you’ll also need to provide evidence of these. Again, that usually takes the form of two to three months worth of bank statements.
Remember that this can include retirement accounts, 401(k)s, stock investments, and certificates of deposit. When submitting a bank statement, submit every single page, even if it’s blank.
Finally, you will need to obtain a gift form if someone you know plans to give you gift funds to help you cover the down payment. This will be sent along with bank statements to show where the money’s coming from and confirm that they aren’t expecting repayment.
Miscellaneous home loan documents
There are some other documents you may need to give your lender, depending on your circumstances.
For example, if you currently rent your home, you may be asked to prove your rent payments. This can be done via canceled checks.
You will also be asked to give the contact details of your landlord for the past 2 years, so ensure you have that to hand.
If you are divorced, you will need a copy of the divorce decree. This will be needed if you need to show evidence of alimony or child support payments.
If you have a bankruptcy or foreclosure on your credit history, again, this won’t preclude you from getting a mortgage. However, you will want to check how long you will have to wait before getting back into the market.
If you went through bankruptcy, you’d need to show evidence that your debts have been discharged. If you went through foreclosure, you’d need to prove that the property deed has been discharged.
You may not know that you don’t need to be a US citizen to qualify for a mortgage. However, the lender will still want evidence of your income to ensure that you will repay it.
As a non-citizen, you may be asked for your green card, an employment authorization document, or an approved visa. You may also have to answer questions about your residence and immigration status.
Finally, if you don’t have a lot of credit history, lenders will find other ways to see how you pay your creditors. For example, you may need to send evidence of paid bills, such as phone, cable TV, or your car insurance.
Home loan documents checklist
What documents do you need to apply for a home loan?
- Basic mortgage application documentation
- Income documentation
- Assets and debt documentation
- Credit check documentation
This is a long list of documentation that you may or may not need for your home loan. It looks like a lot, but remember that every home loan is going to be different.
As such, you may find you need much less than what’s listed here. For example, if you’re married and have held the same job for several years, you’ll need much less documentation than a divorced person who’s self-employed.
If you’re ever unsure, the best thing to do is talk to your lender. They want to help you, so ask them to run you through all the documentation that you’re going to need.
Any good lender will be more than happy to help you out here. Sit down and talk with them, and they can walk you through the whole process.
Before you start applying for home loans, go through this checklist to ensure you’ll have everything you need.
Basic mortgage application documentation:
- Pre-approval details about the loan
- Basic identifying info about each person on the application
- Details of the home you’re buying
- Employment information for the past two years for each applicant
- Monthly income and household expenses
- A list of your assets and liabilities
- A declaration of any legal issues that may affect your finances
Income documentation:
- Two years worth of W-2 forms for each applicant
- 30 days worth of pay stubs, possibly signed by your employer
- Up to three years worth of income tax returns
- IRS form 4506-T
- Income tax returns, profit and loss statements, and business debts for those self-employed
Assets and debt documentation:
- Up to three months worth of statements on all accounts for each applicant (including bank accounts, student loans, credit card accounts, and student loans)
- Documentation for any large deposits on your bank account, showing where they’ve come from
- A judicial decree or court order for each obligation due to legal action
Credit check documentation:
- Explanation letter for late payments, collections, judgments, or any other issues on your credit history
- Bankruptcy or discharge papers if needed
- Payment history for utilities, cable TV, car insurance, and so on, if needed with a thin credit history
Getting Ready To Apply
If you’re thinking about applying for a loan, you’ll need to start getting ready to have everything in hand. Find as many of these documents as you can, and ensure they’re in a safe place, ready to be grabbed for your application.
It’s a good idea to check your credit score now before you allow a lender to check it. That way, you know how it’s looking and whether you need to do anything to improve it.
For example, there may be mistakes on it that are affecting your credit score. Check for them carefully, and have any issues corrected if needed.
Also, try to pay down as much debt as you can before you apply for your loan. You don’t need to be debt-free, but the less you have, the better your debt-to-income ratio will be.
You’ll also want to look into pre-approval for a mortgage. This allows you to work with a lender and work out how much you can afford on a mortgage.
When you’ve been through this process, you’ll have gone through most of the steps for getting a home loan. It makes it easier for you to budget for a home, and you’ll be a more attractive prospect for lenders.
Don’t forget that specialized home loans exist, too. For example, anyone involved in active service can apply for a VA loan, giving you a much better interest rate.
With this checklist of your home loan documents, you’ll be able to gather together all the details you need for your home loan before you start applying. Take a look, and see what you need now to make it easier to get that loan.
