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Scrolling through glossy online listings might fuel your dream-home fantasies, but the homebuying process begins in earnest when you contact a lender and get preapproved for a mortgage. Although it’s nonbinding, mortgage preapproval reveals how much a lender is willing to let you borrow and what kind of mortgage you may be eligible to receive. Once this process is complete, the lender will provide you with a preapproval letter.
You can get similar information regarding your estimated borrowing limit by going through pre-qualification, which is an informal process involving self-reported financial data.
Preapproval, on the other hand, is substantiated by financial documentation, which is why a preapproval letter from a lender is meaningful. Pre-qualification can be a helpful way to establish a realistic budget, while a preapproval letter lets real estate agents and home sellers know that you’re able to obtain financing and are ready to buy a home.
Once you’ve tracked down all the necessary information, you’re ready to start researching lenders that may be a good fit. Many of them have a preapproval portal on their websites.
The Complete Guide to Documents Needed for Pre-Approval of a Home Loan
Getting pre-approved for a home loan is one of the most important steps when buying a house. Pre-approval provides you with an estimate of the loan amount you qualify for and shows sellers that you are a serious buyer. However, to get pre-approved, you need to submit several documents to your lender for review. I have created this comprehensive guide to walk you through the key documents needed to get pre-approved for a mortgage.
Why Get Pre-Approved?
Pre-approval is different from pre-qualification in that it involves a more in-depth look at your finances. While pre-qualification only requires basic information, pre-approval involves submitting documents for underwriting review. Here are some key benefits of getting pre-approved:
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Shows sellers you are a serious buyer Pre-approval letters assure sellers you have undergone credit checks and affordability assessments. This gives you a competitive edge, especially in hot housing markets.
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Locks in an interest rate: Most pre-approvals allow you to lock in a rate for 30-90 days. This protects you from rate hikes while house hunting.
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Speeds up the mortgage process: Since pre-approval includes collecting documents and initial underwriting, the final approval goes faster if you use the same lender.
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Determines pricing and loan options: Pre-approval provides estimates on rates, fees, and programs you qualify for based on your credit and finances.
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Gives you bargaining power on your offer: Knowing your budget allows you to make a stronger offer within your affordable price range.
Key Documents Needed
While required documents can vary by lender, here are some standard items you’ll need to submit for pre-approval of a mortgage:
Identification Documents
Lenders need to verify your identity before issuing a home loan. Provide copies of the following:
- Driver’s license or other government-issued ID
- Social Security card
- Permanent resident card if you are not a U.S. citizen
Income and Employment Documentation
Lenders need proof of your income sources and stability. Have these items ready:
- W-2s for the last 2 years
- Recent pay stubs covering 30+ days
- Federal tax returns for last 2-3 years
- Documentation on bonuses, commissions, or other income
- Contact information for all employers over the last 2 years
Self-employed applicants should also include:
- Federal business tax returns for last 2 years
- Year-to-date profit and loss statement
- Business license or registration
Asset Statements
Lenders verify you have enough funds for closing costs and down payment. Provide copies of:
- Last 2-3 months of bank statements (checking, savings, money market)
- Investment account statements (stocks, bonds, mutual funds)
- Retirement account statements (401k, IRA)
- Documentation on any large deposits or transfers
Property and Housing Documentation
If you currently own real estate, your lender will want information on those properties. This includes:
- Mortgage statements showing loan details, balance, and payments
- Documentation on property taxes, insurance, HOA fees
- Rental agreements if property is an investment
For the new home purchase, provide:
- Purchase agreement with price, down payment, and closing date
- Contact information for your real estate agent
Credit Reports and Scores
Lenders will pull your credit report from one or more bureaus. Be ready to explain:
- Late payments or collection accounts
- Inquiries from recent credit applications
- New accounts opened in the last 6-12 months
Debt Information
List all your debts and payment amounts:
- Credit card statements
- Auto, student, and personal loans
- Child support or alimony
- Any outstanding tax debts
Gift Funds
If receiving gift funds for your down payment, have the giver provide:
- Gift letter with their name, your name, amount, and the giver’s signature
- Bank statement showing withdrawal of the gift amount
VA Loans
For VA loans, submit your VA Certificate of Eligibility showing your entitlement.
Preparing your documents ahead of time ensures quick pre-approval turnaround. I recommend creating a checklist to track items as you compile them. Pro tip: Open a file folder on your computer or paper copies stored in one place. This keeps documents organized and easy to locate.
Key takeaways
- You’ll need to gather documentation to get preapproved, including Social Security numbers, proof of income, banking information and tax forms. (Use a preapproval documentation checklist.)
- You’ll want to get your financial ducks in a row before applying. This can include disputing incorrect data on your credit report or paying off some existing debts to signal to lenders that you can afford a mortgage.
- Pre-qualification is a more casual and informal way to gauge your readiness to buy a home, while preapproval is a more involved process that is best suited to borrowers who are ready and motivated to buy.
- Your preapproval will likely expire in three months or less.
5 steps to get preapproved for a home loan
- Get your free credit score. It’s helpful to know where you stand before reaching out to a lender. A credit score of at least 620 is recommended to qualify for a mortgage, and a higher one will qualify you for better rates. Generally, a credit score of 740 or above will enable you to qualify for the best mortgage rates. You’ll want to get your score as high as possible before embarking on the homebuying journey, but you can also focus on lenders that specialize in working with borrowers with low scores if needed.
- Check your credit history. Request copies of your credit reports, and dispute any errors. If you find delinquent accounts, work with creditors to resolve the issues before applying.
- Calculate your debt-to-income ratio. Your debt-to-income ratio, or DTI, is the percentage of gross monthly income that goes toward debt payments, including credit cards, student loans and car loans. NerdWallet’s debt-to-income ratio calculator can help you estimate your DTI based on current debts and a prospective mortgage. Lenders prefer borrowers with a DTI of 36% or below, including the prospective mortgage payment, though it can be higher in some cases. If your monthly debts are prohibitively high, you may need to address this by refinancing, getting on an income-based repayment plan or paying down your debt more aggressively before you take on a mortgage.
- Gather income, financial account and personal information. That includes Social Security numbers, current addresses and employment details for you and your co-borrower if you have one. You’ll also need bank and investment account information and proof of income. Documents you’ll need to get a mortgage preapproval letter include your W-2 tax form and 1099s if you have additional income sources and pay stubs. Lenders prefer two years of continuous employment, but there are exceptions. Self-employed applicants will likely have to provide two years of income tax returns. If your down payment will be coming from a gift or the sale of an asset, you’ll need a paper trail to prove it.
- Contact more than one lender. Comparing offers from multiple lenders can help you compare rates and fees, and save you thousands of dollars over a 30-year mortgage. Because preapproval involves a hard inquiry, your credit score may experience a slight (but temporary) hit. However, because all of your applications pertain to one loan, you’ll get dinged only one time, rather than getting penalized for every lender that grants you preapproval. According to the Consumer Financial Protection Bureau (CFPB), your preapproval applications will count as only one inquiry if they are all submitted within a 45-day window.
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Documents Needed for Mortgage Pre-Approval – Mortgage Document Checklist For Buying A House
What documents do you need to get a mortgage preapproval?
When you get preapproved, you may be required to provide information or documents. These might include bank statements and pay stubs. A preapproval will also require a hard credit check so your lender can see your credit score and other debt. Typically, you can apply for both a mortgage preapproval and a mortgage prequalification online.
How do I get preapproved for a mortgage?
Getting preapproved for a mortgage is an important step in the homebuying process and requires the lender to evaluate your credit history and financial information. Documents such as employment and income verification, asset statements, debt information, credit history and identification are necessary for mortgage preapproval.
Does a mortgage preapproval require a credit check?
These might include bank statements and pay stubs. A preapproval will also require a hard credit check so your lender can see your credit score and other debt. Typically, you can apply for both a mortgage preapproval and a mortgage prequalification online. Home Loan Preapproval Vs. Approval A preapproval is helpful when you’re shopping for a home.
Do you need a pre-approval letter for a mortgage?
A seller often wants to see a mortgage pre-approval letter and, in some cases, proof of funds to show that a buyer is serious. The first step is filling out a mortgage application and supplying your Social Security number so that the lender can do a credit check on you.