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Documents Needed for the Mortgage Pre-approval Process
Reader Question: “I plan to apply for a home loan to buy a house later this year. I was told I should get pre-approved first. What kind of mortgage documents are needed for the pre-approval process, and for underwriting? I wanted to get a head start on rounding these things up.”
At a glance: Many different types of documents are required during the mortgage application, pre-approval, and underwriting process. Most of them relate to your income, assets and debts. Common documents needed for a home loan pre-approval include bank statements, pay stubs, W-2s and tax returns.
The Various Stages of the Mortgage Process
While this article focuses on the paperwork that’s typically needed for a mortgage pre-approval process, we need to touch on the other stages of the lending process as well. As a borrower, you might be asked for documents at various points along the way.
Here are some of the stages where you might be asked to provide them:
- Pre-Approval: During this process, the mortgage lender will review your financial situation to determine (A) whether or not you’re qualified for a loan, and (B) how much you are qualified to borrow. This happens before house hunting, hence the “pre” title. There are quite a few documents needded during the mortgage pre-approval process (see list below).
- Underwriting: During this process, the lender’s underwriter (or underwriting team) will carefully review the loan application and other supporting documents to ensure that the borrower and the property meet all appropriate guidelines and requirements.
- Conditional Approval: In some lending scenarios, the underwriter might issue what’s known as a conditional approval. This means the borrower is one step closer to closing, but the underwriter still needs some additional documents or information in order to give the final “clear to close” sign-off.
- Closing Day: When all is said and done — and all of the loan documents have been prepared, reviewed and finalized — the borrower can attend closing and finish up the process.
Now that we’ve put the pre-approval into a broader context, let’s look at some of the common documents that are required during the mortgage pre-approval process.
Documents Needed for Mortgage Pre-Approval and Underwriting
Paperwork is the lifeblood of the mortgage industry. While the industry is gradually adopting paperless procedures (such as electronic signatures, or “e-signing”), there are still plenty of documents required in a typical mortgage pre-approval process.
Here are some of the most commonly requested items:
- Social security number for all borrowers who are listed on the mortgage loan. This information can be verified through a Social Security card, tax documents, or anything else that shows the SSN. The lender needs this to verify your identity, to request tax returns from the IRS, and also to pull your credit reports.
- Proof of employment. Your mortgage lender will probably request a list of employers for the last two years (at a minimum). This document will also include each employer’s name, mailing address and phone number. They want to verify your employment, because it relates to your ability to repay the loan.
- Proof of income. These mortgage documents are needed to validate your income for pre-approval and underwriting. It might come in several forms. Usually, it’s your two most recent pay stubs, or the electronic equivalent, that show your year-to-date earnings. It’s your average annual income the lender wants to know about. The lender might also use tax records to verify your earnings (see next item).
- Tax documents. This is a standard document for mortgage pre-approval. So there’s a 99% chance you will have to provide tax documentation at some point. Most lenders want to see your W-2 statements and tax returns for the last two years. Among other things, your W-2s show how much money you earned over the previous year(s). In many cases, the lender will request tax return transcripts directly from the IRS.
- Place of Residence. This one is self-explanatory. For pre-approval and underwriting purposes, the lender wants to know where you’ve lived for the last couple of years (and maybe longer).
- Bank account information. When you apply for mortgage pre-approval, the lender will want to know how much money you have in the bank. They need to ensure you have sufficient funds for your closing costs, down payment, and cash reserves (if applicable). So they will probably ask you for account statements and balances for any checking, savings, or money market accounts. This is another standard mortgage document for pre-approval. Nearly every lender will require this.
- Credit information. Do you have other outstanding loans that you’re currently repaying (e.g., car loans, student loans, etc.)? If so, the lender may ask for documents related to those accounts. They need this information to measure your debt-to-income ratio, among other things.
- Purchase agreement. (Also referred to as the real estate contract.) Once you have a signed contract with the seller, you’ll need to give a copy of it to the lender. You won’t have this mortgage document during the pre-approval process (the “pre” parts means you haven’t found a house yet). But you’ll need to provide it for underwriting and final approval, after you’ve made an offer on a house. This document shows the lender how much you’ve agreed to pay for the house. Later, they will have the property appraised to make sure it’s worth the amount you’ve agreed to pay.
- Gift letters. Are your family members going to provide funds to help you cover your down payment expense? If so, you’ll need to provide a gift letter along with your other mortgage documents. The lender needs to verify that the money is truly a gift, and that your relatives don’t expect any form of repayment.
- Monthly expenses. Some mortgage companies will ask for an itemized list of your monthly payments. This list might include your rent, credit cards, student loans, etc. It helps them evaluate your debt-to-income ratio and your ability to repay the debt.
- Self-employment documents. Do you run your own business? If so, you might have to provide some additional documents during the mortgage pre-approval process. This might include balance sheets, a profit-and-loss (P&L) statement, or federal tax statements for the last two years.
Note: This is just a generic list of mortgage pre-approval documents. It includes some of the most commonly requested items. Depending on your situation — and the type of home loan you are using — you might be asked to provide or sign additional documents that are not on this list.
When you first start talking to a mortgage lender, they will likely provide you with a list of the specific documents they need to issue a pre-approval. This list can vary from one mortgage company to the next.