A mortgage on a home goes a long way, but it’s not as easy as you might think to get it approved. You will need a handful of documents to get approval. It helps to know what you will need to avoid going back and forth when submitting your application. These documents are used to determine whether you are eligible for the mortgage you are applying for. That said, below is a list of some of the documents you need to have for your mortgage application to be approved.
Income and employment
To prove your income, you will need to provide your payslip, but while this is applicable for most people, others will need to provide alternative proof if not paid via monthly paychecks. For instance, you might need to provide the most recent state and federal returns if you get your income through tax returns. If you are a W-2 wage earner, you will need to provide both your recent payroll stub and a copy of your W-2 form. A year-to-date profit and loss statement would be applicable if you are a freelancer, independent contractor or you are self-employed. You would also be required to provide your rental income, the current market value of a rental property, and the rental income in documentation if you earn through real estate.
Any mortgage lender would be hesitant to approve you if your credit score is low. In fact, for a conventional loan or Federal Housing Administration loan approval, you might need a FICO score of not less than 620. Better yet, you might get low interest on your mortgage with a credit score of 760 or more. If your score is low, the more the downpayment your lender will demand.
Most mortgage lenders require in-depth financial information about you. When applying, your lender might require you to sign Form 4506-T. This form authorizes your lender to send a request to the IRS for your tax returns. Oftentimes, they will need tax returns of between one and two years. This allows them to assess your consistency when it comes to your pay stubs earnings. Also, they can confirm that there are no large fluctuations between years.
Bank statements and other assets
Your bank statements and other assets under your name are also important when assessing your risk profile. And when it comes to investment assets, they will also look at your life insurance, if you have any. This way, they are assured that you have a reserve of mortgage payments for a few months should you get an emergency in the future and are incapable of paying the mortgage payments. Also, a downpayment that just appears on your account out of nowhere would raise an alarm, so ensure that it has been sitting in your account for a few months prior.
The idea of taking out a mortgage can be fun and exciting, but you could also mess yourself up. Do your due diligence and understand fully what your mortgage entails. You could also find a broker like Altrua Financial to walk you through the mortgage process and help you find a suitable mortgage.