Getting pre-approved for a mortgage is the first official step in the lengthy process of finding and buying a home, and it's also one of the most important ones.
First-time homebuyers, filled with the excitement of beginning the
home buying process, will often enter the bank hoping for a quick and simple pre-approval process. They will be surprised to learn that the whole ordeal is a little more involved than they had realized.
To properly prepare yourself for your pre-approval, you'll need to make sure that you have all of the necessary documents and information related to your employment history and credit history. Learn more about exactly what you'll need to bring with you when you get pre-approved:
W2 forms from the last two years.
First, you'll need to provide the lender with your last two years' worth of W2 forms. Your W2 forms will serve multiple purposes: they will verify your employment history from the last two years and they will also serve as documents of your yearly income, so the bank can determine how big of a loan you will be pre-approved for.
Paystubs from the past three months.
While your W2 forms serve to establish the last two years of your employment and income history, your recent paystubs from the past three months are needed to show creditors that you are currently employed and holding a steady job with steady income, an important quality to have when applying for a mortgage.
Tax returns from the last two years.
Your tax returns are necessary to provide the lender as proof that you are current with your taxes and have filed your taxes appropriately for the past two years. Your tax returns also serve as a secondary source of proof for yearly income.
Your checking or savings account statements from your bank for the last three months.
When lenders request statements from the last three months of all of your checking and saving accounts, they want to see what your monthly expenses are like and how much you spend in relation to how much you make. They want to make sure you have sufficient funds to cover any down payments and closing costs, in addition to being able to make your monthly mortgage payments. For this step, it's important for you to provide your lender with official bank statements – not just copies or website printouts. Be prepared to explain any recent large deposits or withdrawals, and be able to provide a source for these.
Statements for all other monetary assets.
If you have any stocks, bonds, mutual funds or retirement accounts, you'll be asked to also provide statements from those for the past two months, as well as any other required information about the source of the funds, as requested by the lender.
All documents pertaining to your current living situation
.If you are currently renting, you'll need to provide the bank with the name and phone number of your current landlord so they can verify that you are currently residing there and that you have kept up with your monthly rent payments. If you currently own a home, the bank will ask to see any documents pertaining to your current mortgage. If you live at home with your parents, you will only be asked to provide the address of your residence and name of the owner.
Business tax returns and year-to-date balance sheet, if you are self-employed.
If you're a freelancer, contractor or small business owner, and you are self-employed, you may not be able to readily provide the bank with documents like W2 forms and paystubs. In this case, the bank will request other documents from you, such as your business tax returns that you've filed for yourself and your year-to-date profit and loss statement, as well as your year-to-date balance sheet. These documents will serve to verify that you are receiving a steady amount of work and that your income is able to support a mortgage. They also help the bank determine whether you've stayed current with paying the taxes required for self-employed workers.
Passport, social security card, birth certificate or other form of identification.
Some banks will have different requirements as far as what kind of proof of identification you'll need to provide when applying to be pre-approved for a mortgage. Sometimes, just your passport and your social security card will be enough identification. Other times, you may be required to provide a copy of your birth certificate as well. These documents are necessary in order for the lenders to verify your identity and to run background checks. These will determine if you have any outstanding loans, any liens against your property or if you have a history of legal or financial trouble.
Any current credit card or loan statements.
If you have any current loans that you are making payments on, such as a student loan for college or an auto loan, the bank will need to see all the information pertaining to this account and your statements from the last three months. If you have any credit card accounts open, you'll need to provide statements for these as well. The bank will want to make sure that you've been keeping up with your payments and are not in danger of defaulting. They also want to make sure that you can maintain your payments on these accounts after adding a mortgage payment to the mix.