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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.
Getting pre-approved for a home loan is an important first step when buying a house, Pre-approval provides proof to sellers that you are a qualified buyer who has been vetted by a lender It also gives you an estimate of how much home you can afford,
To get pre-approved your lender will need to review several documents to verify your finances income, employment and credit history. Having all the required paperwork ready ahead of time will help expedite the pre-approval process.
Here is a comprehensive checklist of the key documents you’ll need for home loan pre-approval
Income and Employment Verification
Proof of Income
Lenders want to confirm your income level and stability. Be prepared to provide:
- Pay stubs covering the last 30 days
- W-2s from the previous 2 years
- Federal tax returns from the previous 2 years
- Documentation of any additional income sources like bonuses, commissions, child/spousal support, disability or retirement benefits
Proof of Employment
You’ll need to verify your current employment status. Provide:
- Names, addresses and phone numbers of all employers for the past 2 years
- Dates of employment with each company
- Contact info for an HR rep or supervisor who can confirm your employment
Self-Employment Documents
If you’re self-employed, also provide:
- Federal business tax returns for the past 2 years
- Current profit and loss statement
- 1099 forms
Bank and Asset Statements
You’ll need to show funds to cover the down payment and closing costs. Provide 2-3 months of statements for:
- Checking accounts
- Savings accounts
- Money market accounts
- Investment and retirement accounts like 401(k)s, IRAs, stocks, bonds, mutual funds
- Information on any real estate you currently own
- Documentation of assets you plan to use for the down payment and closing costs
If receiving gift funds for the down payment, submit a gift letter signed by the donor.
Credit History Documentation
Your lender will pull your credit reports and scores. However, you may also need to provide:
- A current copy of your credit report
- Previous landlord contact info and rent payment records
- Any documentation that explains issues like late payments or collections
Debt Information
Lenders need a full picture of your monthly debts to determine your debt-to-income ratio. Provide statements showing balances and minimum payments for all debts over the past 60 days, including:
- Mortgage statements
- Credit cards
- Auto, student and personal loans
- Child support or alimony
Identification Documents
To verify your identity, provide a:
- Valid driver’s license or state ID
- Social Security card
You’ll also need to list all previous addresses for the past 2 years and dates you lived there.
Additional Documents
Some special situations may call for extra documentation, such as:
- VA loans – Certificate of Eligibility from the U.S. Department of Veterans Affairs
- Non-traditional credit – Utility payment records, rent receipts, insurance payments
- First-time homebuyers – First-time homebuyer certification if applying for specific programs or grants
Tips for a Smooth Pre-Approval Process
Follow these tips to help expedite your home loan pre-approval:
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Get organized – Create folders or a filing system to keep all your documents in one place. This makes it easy to find paperwork and submit it quickly.
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Review reports – Check all your credit reports for errors beforehand. Dispute any inaccuracies that could affect your score.
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Authorize access – Provide written permission for your lender to access tax returns, bank statements and credit reports. This gives them what they need upfront.
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Go paperless – Opt for online access and electronic delivery for all financial statements. This makes documents easy to access and share.
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Ask what you don’t see – If the lender asks for a document you don’t see on this list, don’t hesitate to ask why it’s needed.
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Stay on top of requests – Provide any additional paperwork the lender asks for ASAP to avoid delays.
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Keep copies – Make copies of all documents for your own records in case anything gets misplaced.
Pre-Approval Checklist Summary
Here is a quick checklist of the key documents needed to get pre-approved for a home loan:
Income/Employment Verification
- Pay stubs
- W-2s
- Tax returns
- Employment contact info
Bank/Asset Statements
- Bank account statements
- Investment account statements
- Retirement account statements
- Gift letter (if applicable)
Credit History Documentation
- Credit reports
- Credit score
- Previous landlord info
Debt Information
- Mortgage statements
- Credit card statements
- Auto, student, personal loan statements
Identification
- Driver’s license or state ID
- Social Security card
Additional Documents
- Specific program forms
- VA Certificate of Eligibility
Being prepared with all required paperwork helps pre-approval go smoothly and efficiently. Use this home loan pre-approval checklist to ensure you have everything you need to get successfully pre-approved and on your way to homeownership.
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.
What are the requirements for a mortgage pre-approval?
One of the main requirements for mortgage pre-approval is being in good financial standing. Lenders will want to see proof of income, assets and credit history. You’ll also need to provide identification and verify your employment. Some of the most common documents that are required of each borrower include: 2. Check your credit score
What documents should I bring to a mortgage lender?
Copies of Identification – The bank or mortgage lender will want to see your government-issued ID. So providing copies of your driver’s license or passport is a must. Copies of your Social Security card– Do you remember where you put your Social Security card? If not, start doing some digging.
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.