If you’re applying for a mortgage, it’s a good idea to start prepping your financial documents. Lenders will request paperwork for your mortgage application that proves things like how much money you make and your debts. The exact forms you need for a home loan depend on your situation. For example, someone who is self-employed will likely have to provide different forms than someone who is employed by a company. A lender can get a good sense of your likelihood of being approved by checking out your recent pay stubs, bank statements, W-2 forms and tax returns. Depending on your financial situation, here are seven mortgage documents you might need when applying for a home loan.
1. Tax returns
Mortgage lenders want to get the full story of your financial situation. You’ll probably need to sign a Form 4506-T, which allows the lender to request a copy of your tax returns from the IRS.
Lenders generally want to see one to two years’ worth of tax returns. This is to make sure your annual income is consistent with your reported earnings through pay stubs and there aren’t huge fluctuations from year to year.
2. Pay stubs, W-2s or other proof of income
Lenders may ask to see your pay stubs from the past month or so. Your tax returns help give them a clear idea of your overall financial health, while pay stubs help them gauge your current earnings.
Lenders generally ask for documentation of other income streams, such as spousal support or child support payments, Social Security benefits, investment or rental income, and income from a business or side gig.
You may need to show your lender proof of income through 1099 forms, direct deposits or other means.
3. Bank statements and other assets
When assessing your risk profile, lenders may want to look at your bank statements and other assets. This can include your investment assets as well as your insurance, such as life insurance.
Lenders typically request these documents to make sure you have several months’ worth of reserve mortgage payments in your account in case of an emergency. They also check to see that your down payment has been in your account for at least a few months and did not just show up overnight.
4. Credit reports
In order to assess you as a borrower, lenders often pull your credit reports — with your verbal or written permission.
The type of mortgage loan you may qualify for partly depends on your credit history and credit scores.
Here’s what you should know about credit requirements for different loan types.
- Conventional loans— Conventional mortgage loans are not part of a government mortgage program. You’ll likely need a FICO® score of at least 620 to be approved for a conventional loan. And your score might need to be at least in the mid-700s to qualify for a competitive interest rate.
- FHA loans— These government-backed loans require credit scores of at least 500 to be approved, and your credit scores affects the size of the down payment you have to make. If your score is between 500 and 579, you’ll need a 10% down payment. With a score of 580 or higher, you may be able to put down as little as 3.5%. But keep in mind that lenders can impose stricter standards on top of the basic rules for FHA loans, so the standards can be higher in some cases.
- VA loans— VA loans don’t require a certain credit score to qualify, so lenders can decide on minimum scores for themselves. Lenders may be more likely to overlook low credit scores if you’re applying for a VA loan than if you’re applying for a conventional loan.
- USDA loans— The USDA doesn’t set a minimum credit score, but lenders may have their own minimum requirements.
- Jumbo loans— Credit score requirements for jumbo loans are usually stricter than for other conventional loans because of their large amounts. You may need a score in the low- to mid-700s or above to qualify.
5. Gift letters
Your friends and family might help you buy a house by giving you money. If that’s the case, you’ll need to provide a written confirmation the money is indeed a gift and not a loan by writing a gift letter. The documentation should list their relationship to you as well as the amount of the gift.
The documentation should include the following information:
- The name, address and phone number of the person giving the gift
- How you’re related to the person giving the gift
- The amount of the gift
- The date you received the money
- A statement that the person giving you money doesn’t expect repayment or anything else in exchange
- Your signature and the signature of the person giving the gift, with the date
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