As a preliminary step, you should get pre-approved by a reliable lender before searching for a home.
Documents Needed to Apply for a Home Mortgage
To apply for a home mortgage, you will need to provide your lender with documentation, verifying your employment history, credit, and overall financial situation. If you are applying with someone else (co-borrower, such as your spouse), they will also need to provide the same documents. Be prepared to provide the following:
- W-2s (for the last 2 years)
- Recent pay stubs (two most consecutive recent)
- Bank statements for all accounts, including investments (for the last 2 months)
- Personal and business tax returns, signed
- If self-employed, a copy of most recent quarterly or year-to-date profit/loss statement
- Most recent monthly statement for any mortgage, home equity loan or line of credit you hold on your home
- A copy of the signed Purchase and Sales Agreement
There are a couple of alternative options:
- If you lack credit histories or credit scores, then service accounts (utilities, cable, and/or telephone) are acceptable.
- If you are self-employed, or have rental or other unconventional income, you may need profit and loss statements prepared by a licensed Certified Public Accountant.
- You must supply updated account statements immediately prior to closing.
You will want to be upfront with all your finances and credit. Not disclosing credit problems or holding back requested documents will only delay the process and potentially prevent approval of the mortgage.
Life After Pre-Approval
After you are pre-approved, your loan rep will let you know what other supporting documents are required. The loan rep will then submit your loan application, along with the documents, to an underwriter. Then, the underwriter will return a decision about your application: approval, approved with conditions, suspended (more documentation needed), or denied.
In most cases, an approved loan application will be “approved with conditions.” Satisfying those conditions is the first of two critical tasks that you must complete in order to be fully approved.
When you are approved, make sure to ask for the approval sheet. Work with your loan rep to assure that you are complying with all requirements. Later, when you sign your loan documents, get a copy of the list of all remaining conditions from the closing agent. It is important to leave plenty of time for items to be corrected on your credit report, and for any legal issues to be documented and settled.
Rising Interest Rates
Since interest rates fluctuate, things can change between the day you apply for the loan and the day you close. To protect yourself against rising interest rates, consider locking in your rate with your lender when filling out your loan application. A rate lock, or “rate commitment,” is your lender’s assurance that the interest rate and discount points are guaranteed until the rate lock expiration date.
Of course, if you believe that interest rates will be decreasing, waiting to lock your rate may make sense to you. Rates must be locked before preparing your closing documents.