When applying for a home loan, you’ll need to present your lender with documents proving your ability to afford the mortgage. These could include tax returns, pay stubs and other financial records. They’ll also check your credit report to make sure there are no derogatory items such as late payments or collections on it that could hinder approval of your loan.
Documents for Income Verification
Lenders will require proof of your income, so you’ll have to present copies of both W-2 forms and federal tax returns. Self-employed individuals also require a year-to-date Profit and Loss statement from their business as well as 60 days worth of bank statements from that same entity.
You must provide your employer’s name, address and contact phone number. If you have more than one employer, lenders may ask for a letter from each confirming that you have worked at each of them separately.
Your gross monthly income is an essential figure lenders use to assess your affordability. This is the amount earned each month before taxes and other deductions are taken out, and can easily be verified if you get paid from one employer and receive an annual W-2 form. Alternatively, if you receive payments from multiple sources, lenders will request copies of recent payroll stubs as well as copies of both federal and state tax returns.
Other Documents Needed for Your Home Loan Application
Depending on the lender and type of loan you’re seeking, additional documents may be required as well. These could include homeowner’s association certifications or retirement award letters for those who are retired or have a pension.
Additionally, a letter from your landlord verifying that you have been paying your rent on time is required. While this information may not always be easy to locate, it helps lenders assess whether or not you qualify for a mortgage loan.
If you’re using a gift to cover your down payment, the person giving you the money must fill out and sign a gift letter. This way, the lender can verify that they’re lending money to someone known to you rather than an identity thief.
Identification and Social Security Cards
If your lender needs to confirm your identity, they’ll request a valid photo ID such as a driver’s license or passport, or state-issued identification card. They’ll also want to see either your current Social Security card or Individual Taxpayer Identification Number (ITN).
Additionally, you will need to supply your employer’s tax filing status so the lender can confirm you are employed full-time and not attempting to avoid reporting taxes. This may be difficult for self-employed individuals; however, if you have an accountant on board, asking them to handle this task on your behalf could prove beneficial.
Your lender will want to verify that you possess enough assets to cover the cost of your down payment, closing costs and several months’ worth of mortgage payments in case your employment situation changes unexpectedly. Furthermore, they might request to view any incoming funds such as a large gift or lump sum from a sale in order to confirm your ability to repay the loan.