Get your paperwork ready before applying for a mortgage
When you begin looking for a house, you should also begin looking for all the paperwork you'll need to apply for a mortgage.
Here's a checklist of what you'll need, and it's extensive — W-2s, pay stubs, bank statements, tax returns, brokerage statements and more. It's never too early to start a file and fill it up.
If you apply in person at a bank or mortgage company, plan on taking all of these documents with you. The lender will make copies.
If you arrange your mortgage over the internet, the lender will provide you with a list of documents to fax, email or mail in. If you mail them, send copies, not the originals.
Include every page of any bank or brokerage statements, even if there is nothing important there.
Some lenders can be obsessive. If they absolutely insist on seeing originals, you can get photocopies notarized as true copies, but it will cost you a few dollars.
Here's what you'll need:
1. Debts and monthly payments
Mortgage applications ask you to list all debts and how much you spend each month on everything from rent or your current mortgage (plus hazard insurance, property taxes, mortgage insurance, homeowners association dues and home equity loans or lines of credit) to credit cards, car loans, student loans, child support and alimony.
Your lender needs to know how much you owe, the required monthly payments, the creditor's name and address and the account numbers. Save copies of your most recent bills so you can find and accurately report this information.
You won't have to submit any of those bills, however. The lender will check that information against your credit report, which not only will list all of your debts but also show whether you're paying your bills on time.
Sometimes a debt won't show up on your credit report, but you're still required to disclose it on your mortgage application. Intentionally misrepresenting liabilities (or assets) constitutes fraud.
If you don't have a credit history, your lender may check with your landlord and utility providers for a history of on-time payments.
2. Income from your job
Lenders will want W-2s from the last two years as well as your most recent pay stubs showing your income for the last 30 days. If you have more than one job, bring the W-2s and the most recent pay stubs from all of them.
If you routinely boost your pay with overtime, the lender can add that to your base salary when determining your debt-to-income ratio and how big of a loan you can qualify for.
In most cases, your employer must document that you have received overtime income for the last two years and can expect to receive it for at least the next three years.
Lenders will also ask for signed copies of your last two years' tax returns, even though they'll also ask you to fill out forms allowing them to request copies of your returns directly from the Internal Revenue Service.
3. Self-employment income
If you're self-employed, you'll need complete federal tax returns from the last two years, including all schedules and forms related to your business. A few lenders will also ask for a year-to-date profit-and-loss statement, but not many.
Lenders might also want to see copies of 1099 forms from your clients showing how much they paid for the year or copies of recent checks showing your current income.
Most banks and mortgage companies won't lend to the self-employed until they've been self-employed for at least two full years.
If you work for someone else and are also self-employed, you'll need documentation for both jobs if you want your income from both to count toward how much you qualify to borrow.
4. Sales commissions
Sales commissions can be used as qualifying income if tax returns, pay stubs and verification of employment show that you've received them for the last two years.
Lenders want to know what your base salary is, and in sales it can be fairly low. Your commissions might double, triple or even quadruple that amount every year.
With the required documentation, the lender can use the bigger number.
5. Unemployment income
If you work in a seasonal field that includes regular layoffs — agriculture, fishing, tourism — your unemployment insurance payments can be counted as part of your regular income.
You'll have to show that you've worked in the same line of seasonal work for the past two years, and the lender will want your employer to affirm that you're likely to be rehired next season.
Most state unemployment checks, like most paycheck stubs, show year-to-date earnings. If they don't, you can request a statement from the agency.
If you can't, bring in a check stub, use a photocopy of the most recent check or your bank statement showing the deposit.
6. Disability income
Lenders will count disability income. You'll need a copy of your disability policy or benefits statement from the source of your disability income (usually an insurance company or your employer) showing eligibility and the amount and frequency of payments.
If your disability pay comes from the Social Security Administration, you'll need your SSA award letter or proof of current receipt.
The Consumer Financial Protection Bureau has told lenders they can't ask doctors for any details of your medical condition and they should assume disability payments will continue for the foreseeable future unless your paperwork indicates otherwise.
7. Child support and alimony
You can count child support and alimony as income if you have the court order mandating the payments and proof that they have actually been made for the last six months.
Make copies of the checks, and keep bank statements that show the money has been regularly deposited.
Since these types of income have a defined expiration date, you'll need to show that you'll continue to receive them for the next three years.
If one of your children is about to turn 18, child support will usually stop and the lender won't allow you to include it on your application. The ages of the children and when the support will stop are normally spelled out in the court order.
8. Other income
If you receive any other regular income — a pension, survivor's benefits, a car allowance from your employer, an annual bonus, Social Security, even royalties from software, books or music — you can count it if you can document it.
The general rule is that you must prove you've received this income regularly for the last 12 months and can expect to continue receiving it for at least the next three years.
Use letters or statements spelling out what you are entitled to as well as check stubs, photocopies of your most recent checks or bank statement showing the actual deposits.
If the income comes from another country, it must be included on federal tax returns to count toward qualifying income.
If you own CDs, savings accounts, retirement accounts, stocks, bonds, a life insurance policy with cash value or real estate, you'll need proof of ownership and market value.
Your two most recent statements from a bank or brokerage will normally satisfy lenders about stocks, bonds and monetary holdings.
For land or other real estate, you'll need deeds and other documentation. Your lender will determine its current value.
If there have been any unusually large deposits (ones that exceed 50% of your total monthly qualifying income for the mortgage) into any of your accounts, the lender will need to know where the money came from. The lender wants to make sure it's not from another loan that isn't listed on your application and could prevent you from repaying your mortgage.
If the deposit's source isn't clear from your bank statement, you'll need to document it.
For example, if you sold a car for cash, you could provide a copy of the title transfer, or if you recently received cash as a wedding gift, a copy of the wedding invitation might suffice.
10. VA Loans
That requires VA Form 26-1880 and proof of your service, usually your discharge papers.
Your lender can usually submit your paperwork online directly to the VA and obtain your certificate for you.
If you're currently in the service on regular active duty, data in the VA system can usually prove your eligibility. If you are in the reserves, you'll need to show your latest annual retirement points statement and evidence of honorable service.
11. Down payment assistance
If you're receiving down payment assistance from a community-based program or a state or county program, ask for the paperwork you'll need for your lender.
If you're getting down payment assistance from a friend or family member, you will need a letter from the giver stating that the money is not a loan but a gift that does not have to be paid back.
If it is a loan, that changes your debt-to-income ratio and may make a difference in how much you can borrow.
12. Homeowners insurance
If you are refinancing an existing loan, you will also need the declarations page of your homeowner's insurance policy. This document comes from the insurance company and shows the policy's term, coverage and annual premium.
Finally, don't be surprised if your lender asks to see more. Banks and mortgage companies have become much more thorough and demanding about documentation since the housing crisis.