Gathering the paperwork and documents you'll need to buy a house is a smart move, and it's not as much work as you might expect—particularly when you know going in what you're going to need. You'll have an easier time with your mortgage during a stressful period, and that can go a long way toward getting off on the right foot, especially for first-time homebuyers.
- Before you start pulling together your documents for buying a home, ask for estimates from prospective mortgage lenders.
- Get a free copy of your credit report, examine it for errors, and contact your creditors to fix any mistakes.
- Pull together any documentation on loans you already have, including student loans, car loans, and credit card debt.
- Lenders will want proof of income including pay stubs, W-2s, and at least two years of tax returns.
Shopping for a Mortgage
Compare identical loans to each other before you get started. Ask for an estimate from each lender—they're required to provide them to you under TRID rules.
Before Talking to a Mortgage Lender
Now it's time to begin pulling together documents.
Get a copy of your credit report and examine it. You're entitled to a free report from each of the three credit reporting agencies each year. Contact the creditor to get it fixed if you find a mistake. Note any delinquencies. Your FICO score will be adversely affected if you've made too many late payments.
Qualifying With a Lender
Some lenders might want to see documentation supporting any loans you currently have. This helps them nail down your debt-to-income ratio, an important factor in the mortgage approval process.
Think credit cards, car payments, and student loans. Your most recent statements should suffice if they include your outstanding balance and your required monthly payments, and they should show account numbers as well as the creditors' names and addresses.
A lender will verify your employment to begin processing your loan. This is typically done with by sending them a verification of employment form, so give your employer a heads-up to expect this request for information. Ask your human resources department or boss to send requested documentation back right away.
Proof of Income
The lender will also want paperwork from you that supports your income, including current pay stubs. Your last two should suffice. Make photocopies. Don't hand out your originals.
Lenders will also generally want the last two years of W-2 forms for both you and your spouse if you're married. This is your wage and tax statement, issued by your employer for each calendar year, and it includes all information about your earnings, taxable benefits, and taxes that were withheld from your pay.
If you haven't yet filed your federal tax return yet for last year, find the two previous years' returns. Make copies, and be sure to include all schedules.
Make sure the tax returns are signed by you and dated.
Some lenders will want two months' worth of bank statements, while others request three. Make a copy from each institution and include every page—even blank pages.
Make a copy of each asset statement if you own stocks, bonds, mutual funds, or retirement accounts. Lenders sometimes prefer hard copies over those you can print out online, but they'll accept online statements if that's how you receive your statements. Make photocopies. Don't send originals.
You'll also need some version of a profit and loss statement if you're self-employed, and two years' corporate tax returns if you own an incorporated business.
You can bring your driver's license with you for identification and reproduction if you're meeting with the lender in person. Otherwise, copy your license on a scanner or copy machine and include it. Your license should include your photograph.
Your Earnest Money Deposit
You'll most likely have to substantiate where this money came from. If it's a gift from family or friends, you'll need a statement from each of them corroborating the amount and that you're not expected to pay it back. In other words, it's not a loan to be included in your debt-to-income ratio.
It should be apparent from your bank statements if you've diligently saved up the money or if you've sold another asset to raise the cash, and you've already provided copies of those.
Ask About Upfront Costs
Many lenders will request a fee so they can get a copy of your credit report, but some don't. Appraisal and credit report fees are generally paid when you're ready to accept the loan, not when you're qualifying.
Don't pay any fees to a lender until you have elected to use that particular lender.