What Documents Do I Need for a Traditional Mortgage?

Did you know that 64% of Americans own a home? Unless you’re sitting on a huge nest egg, odds are that you will need a traditional mortgage to afford a house.

Sadly, mortgage applications can be a huge headache. That’s because lenders want to view every aspect of your finances to make sure you’re a good candidate.

So, exactly what documents for a mortgage do you need? If you want to learn the answer to this question, you’re in the right place.

In this article, we’ll go over everything you should gather before submitting your application. Let’s get started!

Documents for Income and Employment

Lenders want to make sure that you can pay back the money you’re taking out for a home. So, they will ask for income and employment verification.

The more consistent and stable your employment history is, the better chance you have. The first thing you should get is your W-2 forms from the last two years.

If you don’t have any W-2 forms, then the lender will contact the IRS for whatever tax returns you submitted. Next, you will need pay stubs from the last 30 days of your job. In some cases, your employer will need to sign them.

These can either be in paper form or electronic form. If you receive commission or overtime payment, you will need to verify these as well.

Finally, you will need two to three years of your income tax returns so that the vendor can verify both your income and the deductions you took.

If you pay alimony or child support, you will also need documents related to this.

What should you do if you’re self-employed? You will likely need at least two years of employment in the same industry. You can prove this with things like letters from clients, or current contracts.

Documents for Assets and Debts

Once your income is established, lenders will want to take a look at your specific debt-to-income ratio. Assets are important here because after the down payment and closing costs, you will likely be down a lot of money.

The lender wants to make sure that you’re still financially sound for your mortgage payment. First, they’ll want to see your bank statements from the past two or three months.

This will give them a good idea of your cash flow, as well as how much money you have set aside for a down payment.

Next, you should gather all documents related to your retirement and investment accounts. This includes things like:

  • 401(k) plans
  • Individual retirement accounts (IRAs)
  • Stock investments
  • Certificates of deposits

Finally, many people use gifts from their families to cover their initial down payment. If you fall in this category, you will need a gift letter. This is a letter signed by the family member giving the gift.

Credit Verification

Next, the lender will check your credit score. The good news is that you won’t need to submit any physical documents of your credit report. The lender will just ask for your permission to check it.

A few bumps and scratches on your credit score likely won’t prevent you from getting a home. But, if there are some major problem areas, the lender will likely ask for a letter of explanation.

The strength of your credit score will determine what types of interest rates you receive.

Other Miscellaneous Documents

We’ve covered the main documents you will need for your application. However, there are still some miscellaneous ones that your lender will likely ask for. First, you will need a government-issued ID.

If you’re a non-citizen, you will need to provide a green card, approved visa, or an employment authorization document. Next, you need a signed copy of the purchase and sale agreement. This provides information on the price of the home that you want to buy.

If you’ve been renting for the past few years, you will need to provide some documents from that, too. This includes proof of payment and the contact information for your landlords.

If you’re divorced, you will also need to find your divorce decree. This provides information on things like child support and alimony.

Can You Get a Mortgage With Bad Credit?

Getting a mortgage with bad credit can be a hard task. You will likely get denied by a lot of lenders that aren’t willing to take on someone with subpar credit.

The good news is that it’s not impossible to get a mortgage with a bad credit score. The first thing you can try doing is including a letter of explanation. This allows you to give context for why you have a bad credit score.

Maybe you experienced a family emergency or similar circumstance. This can help quell any worries that your lender might have. But, the reality is that if you have a credit score below 620, then you will find it next to impossible to be eligible for a mortgage.

That is at least a traditional one. If you fall in this category, you might want to consider financing for no credit check homes.

These types of loans bypass credit checks and a lot of the paperwork that comes with traditional loans. The only downside is that they require a large down payment and higher interest rates.

Enjoy Learning About Documents for a Mortgage? Keep Reading

We hope this article helped you learn more about the documents for a mortgage. We recommend gathering all of these documents before you begin the application. That way, you’re not overwhelmed once the process begins.

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Luckily, we’re always adding new content to our site. So, continue diving in to learn everything you can about a diverse range of subjects.

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