Home Loan Preparation Tips and Documents Needed

After shopping to find the right mortgage lender, its time to get ready and submit the mortgage loan application.  Hopefully, as a prospective new home loan borrower you have already compared the mortgage loans available and are familiar with the loan qualification guidelines.  One of the fundamental reasons to at least garner a basic understanding of the home loan process and guidelines is to aim and discover what documentation will be needed from you to satisfy the qualification requirements with the mortgage lender. 

The more you know, the easier the process is.  Although, it may seem foreign and a difficult task to understand the mortgage business, mortgage lending is far from rocket science. 

Much of the information required by the mortgage lender will be requested shortly after or at the same time you fill out the home loan application.  It is important to make sure you supply as many supporting documents as possible to the mortgage lender.  Rarely do mortgage companies find that a customer supplied too much paperwork.  Conversely, numerous customers of the mortgage lender do not provide the proper paperwork requested and subsequently complain about the amount of time it takes to approve the loans and set up the home loan closing or settlement.  

Before panic sets in about the documentation required to approve your home loan request, you will not be asked to furnish your grades from high school.  More often than not, mortgage loan approvals are completed through an automated underwriting system.  These automated underwriting systems have significantly accelerated the time it takes to process a home loan request.  The findings or results of the automated approval are the supporting documents that will be required from you by the mortgage lender.  Fortunately, the automated systems have generally lightened the load on needed supporting documents for a mortgage loan.

It is important to understand that the loan approval is dependent on your qualifications and the documentation you provide to support your qualifications.  To insure a smooth transaction, it is crucial that you have all your documentation in order before the initial application for the home loan.

Here’s a list of the most common documents needed in order to apply for a mortgage loan and meet the needs of the automated underwriting programs.  Your loan application will include many of the following but clearly not all of these will be needed.  You may be required to supply more or in fact fewer documents depending upon the type of home loan you’re applying for as well as the strength of your qualifications. 

Personal Information:

Copy of your driver’s license.
Copy of social security card.
If applicable: copy of complete divorce, palimony, alimony papers.
If applicable: copy of green card or work visa permit.

Employment Information:

Most recent two years W-2’s.
Most recent pay stubs covering one month period.
If applicable: self-employed will need two years tax returns and YTD profit & loss statement.

Tax returns are generally not required for salaried workers or hourly wage earners that do not have commission income or reimbursed business expenses.  For those home loan borrowers that do have reimbursed business expenses, commission income, self employment income or rental income, the most recent two years complete tax returns with all schedules will be required.

Savings and Asset Information:

Most recent two months complete bank statements for any and all accounts with all pages.
Most recent statement from retirement, 401k, mutual funds, money market, stocks, etc.

Credit Information:

Name, address, account number, monthly payment and current balance for: installment loans, revolving charge accounts, student loans, mortgage loans, and auto loans.  Most of this data is used to fill out your home loan application and actual copies will not be needed by the mortgage lender.

If the Home Loan if for a Purchase:

Legible sales contract signed by buyers and sellers for purchase transactions.
Copy of the earnest money deposit check.

If a Refinance or you own Rental Property:

Copy of note from current mortgage loan.
Copy of hazard (homeowners) insurance policy.
Copy of the payment coupon or monthly loan statement for current mortgage.
If applicable: If the property is multi-unit, you may need the leases.

The end result of a well prepared loan application, supporting documents and understanding of the mortgage loan process is a file referred to as clear to close.  The term used to describe the fact that your home loan is ready to be signed and the funds disbursed.