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Getting preapproved is a crucial step in the process of getting a mortgage to buy a home or do a refinance. Before you can get preapproved, though, the lender will need to review and verify information about your credit and financial situation. Being prepared with the documents needed for mortgage preapproval will help make the process go more smoothly and quickly.
Here’s a checklist of what you need to get a mortgage preapproval letter.
Documents for mortgage preapproval
|Pay stubs from at least the past 30 days
|Tax returns (including W-2s) from the past two years
|Bank statements from the past two months to three months – checking, savings, money market accounts
|Employment information – contact information of employers in the past two years (some employers have an employment verification phone number lenders can call)
|Business records if self-employed
|Other income sources – bonuses, child and/or spousal support, disability or VA benefits, pension, Social Security or other sources
|Account statements from the past two months to three months – 401(k)s and/or IRAs, CDs, mutual funds or other investment or retirement vehicles
|Down payment gift letter, if applicable
|Information on other real estate if you have multiple properties
|Loan statements from the past 60 days – auto loans, credit cards, personal loans, student loans and others
|Credit reports and scores, retrieved by the lender with your authorization
|Rental history – contact information for landlords and proof of rent payments, such as canceled checks or paid receipts
|Driver’s license, Social Security card or other form of ID
|Recent residences and tenure at each
Employment and income
To determine whether you qualify for a mortgage, the lender must confirm your ability to repay the loan, even in the preapproval stage. To do this, the lender will verify your employment status and income. Lenders look for an applicant to have been employed with the same company or in the same industry for at least two years, with consistent income; however, if you changed jobs in the last two years, that won’t necessarily disqualify you from a loan.
The following information is needed for all borrowers signing the loan:
- Pay stubs from at least the past 30 days
- Tax returns (including W-2s) from the past two years
- Bank statements from the past two months to three months – checking, savings, money market accounts
- Employment information – contact information of employers in the past two years (some employers have an employment verification phone number lenders can call)
- Business records if self-employed
- Other income sources – bonuses, child and/or spousal support, disability or VA benefits, pension, Social Security or other sources
The lender will also request copies of your asset statements to ensure that you have enough funds to complete the home purchase and to verify the source of those funds. Some examples of assets a lender might ask for include:
- Account statements from the past two months to three months – 401(k)s and/or IRAs, CDs, mutual funds or other investment or retirement vehicles
- Down payment gift letter, if applicable
- Information on other real estate if you have multiple properties
Lenders need to know about your debts to calculate your debt-to-income ratio, or DTI. This ratio is a key factor in determining your eligibility for a mortgage and the amount you can borrow. DTI is also an important factor in calculating your interest rate. To assess your debt, lenders will ask for:
- Loan statements from the past 60 days – auto loans, credit cards, personal loans, student loans and others
Your credit history is the foundation of the mortgage preapproval process because it determines your creditworthiness. Lenders are primarily looking for evidence that you can pay your mortgage on time and in full. Late payments, missed payments, bankruptcies and delinquent accounts referred to collection agencies could be red flags on your application.
Lenders also determine your risk level by analyzing the variety and number of credit accounts you have open. They prefer applicants with a proven track record of managing different types of credit.
The credit history documents required for a home loan might include:
- Credit reports and scores, retrieved by the lender with your authorization
- Rental history – contact information for landlords and proof of rent payments, such as canceled checks or paid receipts
Before a lender can preapprove you for a mortgage, you’ll need to provide forms of identification. This might include:
- Driver’s license, Social Security card or other form of ID
- Recent residences and tenure at each
Additional documents needed for special circumstances
Borrowers in special circumstances, or those seeking to get a unique type of loan, may need to provide additional documentation for a home loan preapproval. These situations might include:
- Already owning a home: If you already own a home, the lender will require additional details. These include information about the home’s value, occupancy status and purpose, as well as the property’s monthly expenses. You will also need to provide information about your current mortgage, including the lender’s name and account number, loan type, monthly payment amount, outstanding balance and credit limit.
- Being self-employed: In addition to needing bank statements and copies of tax returns, lenders may ask for a profit and loss statement, a business license and other proof of steady income.
- Using veteran benefits: For VA loans, borrowers will need to provide identification and a Certificate of Eligibility (COE). The U.S. Department of Veterans Affairs provides a COE, which proves you’re eligible for VA home loan funding.
Mortgage preapproval FAQ
If you’re prepared with all of your documents and eligible for the loan, many mortgage lenders can issue a same-day preapproval, or at most within a few days.
A mortgage preapproval typically expires after 90 days. Some lenders have shorter windows of 30 days or 60 days, and others longer, up to 120 days. If you chose to lock in your mortgage interest rate, this usually aligns with your rate-lock period. If you haven’t found a home within that time frame, it’s possible to easily get a new preapproval, provided your credit and financial picture hasn’t changed since you first got preapproved.
Your credit score could drop slightly when you get preapproved because the mortgage lender checks your credit report. This decrease is only temporary. If you’re obtaining preapprovals from more than one lender, you can limit the impact to your score by getting them all within a 45-day window.
A mortgage prequalification can help give you an idea of your homebuying budget based on basic information you provide, and it might or might not involve a credit pull. A prequalification isn’t an indication that the lender is prepared to provide you with financing, however, so it won’t be useful when you make an offer on a home. A preapproval, on the other hand, means that the lender has done a preliminary evaluation of your finances and is willing to give you a loan for a certain amount. Still, a preapproval is not a firm commitment. The loan won’t be cleared to close until the home appraises and the lender satisfactorily completes underwriting.
When you make an offer on a home, you need to include a preapproval letter from a mortgage lender to show the seller you’re a legitimate buyer with financing. A preapproval also helps save time when you’re ready to formally apply for the loan, because much of the information-gathering has already been completed. That’s why it’s best to only get a preapproval from the lender (or lenders) you ultimately want to work with.
You can improve your chances of getting a preapproval by reviewing your credit report for any errors that might lower your score, such as incorrect contact information or paid accounts that haven’t been updated as such. You can also take steps to improve your credit score if needed. Paying bills on time is important, but you might also want to look at your credit utilization and the types of loans you have. You can also take steps to reduce your debt to lower your debt-to-income ratio. Lastly, avoid making any large purchases or opening new lines of credit while in the process of getting preapproved.