It would be an understatement to say that a home loan application requires a substantial amount of paperwork. And it can be hard to know exactly what you need to prepare ahead of time to ensure a smooth process. If you have a reliable loan officer, you will probably be guided each step of the way. But if you want to prepare ahead of time or aren’t working with a specific loan officer, here are some of the main pieces you need for your mortgage paperwork.
Proof of income is perhaps the most important aspect of any home loan application. You must show that you are not only in good financial standing but also that your income can support a monthly mortgage. Generally, it’s best to have no more than 25-28% of your gross (before taxes) monthly income go towards your mortgage. So, if you make $5,000 per month, you would want your mortgage to be more than $1400 per month.
For paperwork, you will need several months of pay stubs and/or bank statements, as well as the last two years of your tax returns and the accompanying W-2s. This will show not only your income but also your financial history, as well as confirm any outstanding debts you are making payments on (student loans, credit cards, etc.). If you’re self-employed, you will need to show your form 1099s instead. Keep in mind that you will need to show that you have been successfully paid as such for at least the past two years.
Other Sources of Income
Disability, unemployment, commission sales, social security, spousal death benefits, pensions, retirement pay, and inheritances all must be accounted for and annotated appropriately. Additionally, if your family or friends intend on helping you out financially, they must provide a signed gift letter with any amount of money they provide. This letter must state that they are giving you the money and not loaning it.
If you receive royalties or own property, stocks, retirement funds, or other financial investments, those must also be reported. All paperwork associated with your real estate must be provided to support your property’s current value. If you’ve recently sold any large items (a sofa or your TV), proof of this transaction or a written statement must also be provided to support your bank deposit.
Debt Obligations And Monthly Payments
And if you’re paying off debt (like many of us are), you will need to show proof of exactly how much you owe and what your monthly payments are. This can come from your bill statements or even from screenshots of your online account. Check with your loan officer or lending company to confirm what forms of documents they will accept.
Another form of payment history that may be required is that of your monthly rent payments. This could also come from your bank statements or from your apartment complex billing account. This will show your reliability in making regular payments akin to your mortgage. If you owe child support or alimony you must also report these and show proof of your financial obligations (court orders, bank statements, etc.).
Your mortgage paperwork will also include the status of your credit. As such, you will need to have your credit score pulled (for which you will sign a consent form). If there are any negative hits to your score, you may have to provide a statement explaining the circumstances. Before you have your credit score pulled, however, check with the credit bureau to see if there are any discrepancies against your account.
If you want to improve your credit before taking out that mortgage, pay off as much debt as possible. Additionally, make sure you pay your bills and rent on time, as these contribute to your score as well. For more info on how to boost your credit score, check out this article!
Mortgage Paperwork For Military Veterans
If you’re a military veteran, you will likely be applying for a VA Home Loan. As such, there are some additional pieces of paperwork you will need. First, you will need proof of your service, usually in the form of your separation paperwork (a DD214). In addition, you will also need your Certificate of Eligibility to show you can apply for a VA loan. Visit the VA Benefits website for more information on how to get a copy of these items or have your lender retrieve them for you.
At HomeRate Mortgage, we can help you with that mortgage paperwork to ensure your home loan process is as smooth as butter. Whether you’re applying for a conventional, FHA, or VA loan, our experts will get you on the right path to home ownership. Visit us online today to get started!