Being preapproved for a mortgage can give you an idea of the amount of home you can afford, but it’s not the only step. You must provide lenders with various documents that demonstrate your financial situation and confirm that you meet all loan criteria.
Documents required for mortgage preapproval include bank statements, pay stubs and W-2 forms from your current and previous employers within the last two years. These records allow lenders to determine how much income you earn, from whom it comes and how much tax you paid.
Your lender may also require tax returns for the past one to three years, depending on their requirements. These documents help lenders assess your income and tax-to-income ratio.
Other necessary documents for mortgage preapproval include a recent photo driver’s license or passport, current utility bill and any other bills you owe from the past two months. It’s beneficial to organize this paperwork in an organized place so you can quickly access it when applying for a mortgage.
Credit Report and Score
Lenders typically pull your credit report with your verbal or written permission in order to assess risk. They use it to look for any negative factors that might prevent you from getting a mortgage, such as bankruptcy or foreclosure. Furthermore, this provides an opportunity to correct any mistakes reported so that your chances of approval increase significantly.
Gift Letters
About 30% of Canadian home buyers receive assistance from family members, which can reduce the down payment and boost your chances for approval on a mortgage. If you plan to receive such money, lenders usually request a gift letter from your recipient outlining who it’s going to, how much it’s going to and why.
Insurance Papers and Investment Documents
Your lender will want to see any other assets you possess, such as retirement and investment accounts. They may even request to see your life and health insurance policies.
If you are self-employed, your lender may require tax documents and business returns for the past one to three years. They’ll also want to see an audited Profit and Loss statement for your company for the current year.
To prove your eligibility for a mortgage loan, you’ll need two months’ worth of bank statements for all personal and business accounts. This way, the lender can verify that there are sufficient funds in your accounts to cover monthly mortgage payments.
A trustworthy loan officer can provide all of this information and answer any queries you might have about the mortgage process.
No matter if you’re buying your first home or refinancing an existing one, your lender is there to guide you every step of the way. They can assist with paperwork and other processes so everything runs smoothly and your loan process is as stress-free as possible.
