If you’re like most people who are buying a home for sale on 30A, you’re going to need a mortgage loan – but your first step is preapproval. In order for a lender to preapprove you for a mortgage, you’ll need several documents (and more than usual if you’re self-employed).
Here’s what you need to know.
What Do You Need for Mortgage Preapproval?
Mortgage preapproval is different from prequalification. In preapproval, the lender actually checks your credit and looks at your financial statements to make a decision on letting you borrow money. In prequalification, you don’t have to show any proof of income or anything like that – you just tell the lender how much you make and how much you spend, and they let you know whether that would qualify you for approval if you can back up what you’re saying.
You’ll need several documents to get mortgage preapproval, because you have to prove to the lender that you’re telling the truth about your income and debt. Without checking your credit and reviewing your documents, the lender has no way of knowing whether you’re likely to – or even capable of – repaying the loan.
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Documents You Need for Mortgage Preapproval
Here’s a quick list of documents you’ll most likely need for mortgage preapproval. Keep in mind that your lender might need more documents than what you see here – and you’ll probably have to furnish extra proof of income if you’re a self-employed business owner.
You’ll most likely need:
- Pay stubs from the last 30 or 60 days that show your year-to-date income and your monthly income
- A profit and loss statement if you’re self-employed
- Two years of federal tax returns
- W-2 forms from the past two years from your employer
- Two months’ worth of statements from all your asset accounts, including checking and savings, investment accounts, and stocks or bonds
- A list of your current real estate holdings
- Your residential history for the last few years, including contact information for your landlord if you were a renter
- Proof of funds for a down payment, including an official gift letter if you’re receiving a cash gift from your parents
You’ll also have to sign a document that gives the lender permission to check your credit.
Related: Why you need mortgage preapproval
What if You Don’t Have All the Documents You Need?
It’s a good idea to begin gathering these documents as soon as you know you’re going to get a mortgage loan. However, sometimes you just can’t find what you need.
If that happens in your situation, let your lender know. There may be other ways you can prove your income and debt so that your lender can make the right decision on letting you borrow money to buy a home.
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