If it’s been a decade or two since you applied for a mortgage, you may be surprised how much things have changed.
Before the financial crisis of 2008, it was fairly easy to get a new mortgage or refinance an old one — and you didn’t have to provide much documentation about your income, debts, employment history and other information. That lassez-faire approach to loans ended with the financial crisis in 2009.
Today, if you want a loan, you need to be prepared — but where do you start? Well, the best plan is to start gathering up the financial documents you’re going to need to show your lender. In a world that’s increasingly gone “paperless,” it can be time-consuming to track down the paperwork you need, print it out and compile it, so start early.
While every lender has their own specific requirements, there are at least seven specific sets of documents you’re definitely going to want to have ready.
1. Your Photo ID, Social Security Number and Citizenship Papers
Your lender doesn’t want to take any chances that you’re not really who you say you are. If you’ve lost your state ID or driver’s license, get it replaced before you head to the bank or credit union. Have your SSN ready, too.
If you’re an immigrant, you should also bring proof of your residency status, including your green card, visa and employment authorization.
2. Bankruptcy, Foreclosure and Divorce Records
A bankruptcy within the last 10 years probably won’t stop you from getting a loan, but your lender will want proof those debts were discharged. If you had a prior foreclosure, you have to wait at least three years from sheriff sale date to get a new loan, and the lender will need proof that your prior property is no longer in your name.
If you’re divorced, the bank wants to know if you’re required to pay alimony or child support. Additionally, you may be able to use child support and alimony income to qualify. Find the appropriate documents and take them with you.
3. Residence History for the Last 2 Years
A lender is going to require you to provide 2 years worth of residence history. Even if you lived with your parents, you’ll need to give that address to the lender. In some situations, a lender may need to verify your rental payment history. This can typically be done by giving the lender a copy of 12 month’s worth of cancelled checks.
4. Pay Stubs, W-2s, 1099s and Tax Returns
Your lender wants reassurance that your income is steady and sufficient enough that you won’t have trouble making your mortgage payments on time.
Make sure that you gather up all of your tax returns, W2s, 1099s and other income verification documents for the last two years. Pay stubs, if you’re employed by someone else, for the last two months should also be included. This helps your lender verify that you have income enough to cover your loan and gives them an overall picture of your financial stability.
If you do gig work on the side, your lender may be satisfied with your 1099s. If you’re primarily self-employed, you’ll need to provide your profit and loss statements from both the most recent two tax years and the year-to-date.
5. Bank Statements and Proof of Your Down Payment
Take at least two months’ worth of your bank statements with you. This also allows your lender to see that you’ve had the money for the down payment on your home for a while so that there are no questions about its source.
If your down payment was a gift, your lender may need to sign a letter confirming that the money was a gift, not an additional loan that you’ll have to repay on top of your mortgage. Similarly, if your down payment came through some kind of assistance program, just make sure that you have the documentation with you.
If you plan to sell your existing home and use the equity for a downpayment on the next, you want to bring proof of the balance due on your existing mortgage and your appraisal.
6. Proof of Your Investments and Other Assets
Do you have life insurance? Great! Take proof of that with you to the bank, as well. You also want to bring along your most recent quarterly statements for your 401K or other retirement account, IRA statements and brokerage account records.
This helps your lender see that you have assets in reserve that could be used to cover your mortgage if you have a sudden layoff, job loss or other problem that leads to a crunch in your income.
7. Monthly Debt Records and Explanations for Any Issues
Yes, your lender will pull your credit records, but be prepared with your own list and records. You want to be able to confidently rattle off the amounts you pay each month on your auto loan, car insurance, credit cards, utility bills and student loans.
If you suspect (or know) that you’ve got a couple of dings on your credit from late payments on your student loans or a month or two without work, be ready with a letter of explanation that tells the lender why the gap occurred. For example, if your company shuttered its doors for a few months during the pandemic and you were laid off, bring your unemployment records and a prepared explanation of how the late payment on your student loans occurred while you were filing for deferment.
Keep this in mind: Every lender is different. Even with all this in hand, your lender may send you searching for additional records, but this is a good start — and it could be the first steps in the process of obtaining your dream home! Your diligence now will make the entire process move along much more easily, and that’s less stress and hassle for you.