What to bring for mortgage pre approval

Getting pre-approved for a mortgage before you go home shopping isn’t required, but it is a good idea, especially in a seller’s market, where competition among buyers is intense. Unlike a pre-qualification, a pre-approval letter lends weight to your bid on a home, proving to sellers that you have the financial clout to stand behind your offer.

To get pre-approved, you’ll need to verify your income, employment, assets, and debts, says Bob McLaughlin, senior vice president, and director of the residential mortgage at Bryn Mawr Trust, in Bryn Mawr, Pennsylvania.

It’s likely you already have many of the records you’ll need or easy access to them. “Gathering the documents shouldn’t take more than a week, depending on the lender’s requests and whether you need records from outside sources, like an attorney or county government,” says Andy Kush, director of home loan sales at Patelco Credit Union in Pleasanton, California.

Even for a pre-approval, your lender may want more documents, especially if you’re self-employed or your income comes from several sources. Also be prepared to share information such as your Social Security number, which is used to check your credit reports and scores; your employer’s name and address; and your hire date.

Here’s a list of documents you’ll need according to McLaughlin, Kush and Michael Kuentz, President of Lenders One, an independent mortgage bankers’ cooperative based in St. Louis.

Income and employment

The documents required to verify income depend on how you get paid. This step is easiest for workers with a paycheck from one source, which provides an annual W-2 form, and who have little or no overtime or shift differentials.

Tax returns

Copies of your two most recent federal and state returns may be required.

Income

W-2 wage earners

Copies of W-2 forms and your two most recent payroll stubs. If income includes overtime, bonuses or differential pay, you may need your most recent end-of-year payroll stub.

Self-employed, freelancers and independent contractors

Self-employed borrowers, including sole proprietors, partnerships and S-corporations, need a year-to-date profit and loss statement and two years of records, including the Form 1099s you used to report income and file taxes.

Real estate income

Document the rental income, address, lease and current market value of a rental property if you will use this income to qualify for a mortgage.

Assets

Bank statements

Copy 60 days’ worth of statements for every account whose assets you’re using to qualify for the mortgage. Include even blank pages of the statements.

Retirement and brokerage accounts

Two months of statements from IRAs, investment accounts (stocks and bonds), and CDs. The last quarterly statement from 401(k)s showing the vested balance. As with bank statements, include every page, even blank pages.

Debts

Monthly debt payments

Lenders examine your payment obligations to calculate your debt-to-income ratio. List all monthly debt payments, including student loans, auto loans, mortgage, and credit cards. Include each creditor’s name and address and your account number, loan balance and minimum payment amount. If you have no credit history, utility bills may be used to help you qualify for a mortgage based on nontraditional sources of credit.

Real estate debt

If your current property is mortgaged, have your most recent statement — showing the loan number, monthly payment, loan balance and the lender’s name and address — and the declaration page of the insurance policy.

Other records

Rent

Renters need to show payments for the last 12 months and provide contact information for landlords for the last two years.

Divorce

Have your court divorce decree ready, if applicable, and any court orders for child support and alimony payments.

Bankruptcy and foreclosure

Ask your lender what documents they’ll need and how long you should wait after bankruptcy or foreclosure to re-enter the housing market.

Down payment gift letters

Lenders will want to talk about your down payment. You’ll need to show the sources of the money you plan to use. If your funds include gifts, you’ll need to get letters from your donors showing they don’t expect to be paid back. Gift letters aren’t required for pre-approval “but we do let borrowers know to be prepared,” Kush says.

Whew. You’re done for now. Keep those files handy, though. You’ll need these documents again when applying for the loan.

Article Source: NerdWallet

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