Getting Ready For Your Mortgage Pre-Approval Application

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Applying for a mortgage and buying a home could require more documentation than anything buyers are accustomed to. The stakes are high when it comes to lending and even a pre-approval application will mean gathering a lot of information. Read on for a list of what you will need to have ready by the time you apply for your mortgage pre-approval.

1. Identification – The lender needs government-issued photo identification along with a Social Security number. Be sure your driver's license or non-driving ID is not expired and if you don't have a Social Security card, you can also produce tax documents.
2. Income and Employment Information – The lender will need the contact information for your last few years of employment. You can prove income using pay statements or past income tax returns. You might be asked to sign a form allowing the lender to access your tax records directly from the IRS. Be ready with several years of income proof as lenders vary with their requirements. Some lenders will also need your Form W-2 or 1099 forms for the last several years.
3. Assets and Savings – Lenders may need verification of your savings so expect to provide your bank account balances. Most buyers must pay the down payment, closing costs, and other costs at closing and that money needs to be in place and stay in place throughout the process. If you have brokerage accounts, retirement accounts, stocks, bonds, and other assets, the lender will sometimes take those things into consideration too so list them all. If you are planning to use a gift from a relative as the down payment, you will need a letter from them demonstrating that the money does not need to be paid back to the giver. Otherwise, it's a financial obligation that could impact your loan.
4. Loans and Debt – A list of your obligations like car loans, credit cards, and more, is next. This allows the lender to determine your monthly debt obligations and your ability to pay back the mortgage. They may use a standard ratio to determine eligibility that compares your income to your debts. Ask the lender what type of ratio they are looking for to learn more.

Every lender has different expectations depending on the type of loan and more. The days of "no-doc" mortgages, however, are long gone and verification of everything is a must, even for the pre-approval. While the pre-approval is not a guarantee of loan approval, it does provide buyers with a lot of valuable information about their ability to buy a home. Speak to a mortgage company to find out more. 

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26 May 2022