Getting pre-qualified is free to you and does not affect your credit score. It's also a good idea to shop lenders because different fee structures or products can mean savings to you.
Talking to a mortgage lender is different from opening a charge account of getting a car loan. Below is a list of documents you’re likely to need. Shopping lenders is a very good idea because this is the biggest purchase you're likely to make, and even though your credit will get pulled by a number of mortgage lenders, your credit score does not get downgraded. One lender’s product might be better for you if you are doing a conventional loan. Another lender might be the better choice if your self-employed. But whatever you do, please, please, please don't assume you can't get a loan. Lenders can look at the documentation you have and see what the real picture is and/or make recommendations that will allow you can get qualified.
Most important is to get pre-qualified before you start shopping for your home. A professional Realtor® will require it, and it's really a service to you. Your offer is stronger when accompanied by a letter from your lender stating that they have looked at documentation of income, assets, and debts. Many listing agents will require a lender letter with your offer. And nothing is more disappointing than having your heart set on a house only to find out the lender won’t qualify you for that price range.
The best known lenders may not be the best choice. Many times they limit their lending to a particular type of client and you may not fit in the box. They can be cost more, their size may mean you are really working with a call center when you start your process, or their book of business simply doesn't include the type of loan you need so they might not have as many options to offer you (e.g., Texas Vet or USDA). Your Realtor® should have a list of lenders that can help you.
Here’s the list I promised of the basics that lenders usually do want to see before they can complete a loan. (A hat tip to Frank Rubi at ActiveRain whose list I used to develop this one.)
Verification of income (If you made money, you need to be able to show where it came from.)
- Earnings statements, for example, W-2 forms, recent pay stubs. Some lenders will take history of direct deposits from an employer, but all employers provide a pay stub even if you have to register on their HR site to get it.
- Tax returns for the past two years.
- If you are self-employed, you'll need profit and loss statements and tax returns for current year and previous two years.
- Proof of additional income, for example, social security, overtime bonus, child support, rental payments to you, alimony, commission, interest income, social security, retirement funds, veteran's benefits, etc.
Verification of your assets
- List of bank account numbers, the address of your bank branch, checking and savings account statements for the previous 2-3 months.
- List of savings bonds, investments, stocks, 401k accounts, etc., and the current market values.
- Copies of titles to any motor vehicles, boats, homes, property or other large value items that are paid in full.
- Copies of Trust papers if you have a trust. Proof of inherited items.
- You will need to prove where you are getting the down payment for your new property. If a relative is gifting you the money you will need to show proof. To take this once step further often the lender will not only ask for a letter documenting the gift with a statement from the person gifting that money showing they had the ability to do so.
- Proof of the source of any large deposits (some as small as $300 can be considered a large deposit) that is traceable to a direct deposit by an employer. If you sell a big items on Craig's List, do a bill of sale and have the buyer sign it.
- Credit card bills for the past three billing periods.
- Copies of statements for other debt such as car loans, student loans, furniture loans, personal and cosigned installment loans. The lender will require the copies to include those blank pages which usually have a statement like "this page intentionally left blank" on it. Lenders have to document, document, document, so bear with them. Also make sure the creditor addresses, account numbers and phone numbers are on the copies.
- Evidence of mortgage and/or rental payments.
- Copies of alimony or child support. This usually means the entire file and any subsequent court renderings in full.
- Divorce papers: It is often hard to separate debts of an ex-spouse so come prepared.\
- Have you had a foreclosure or short sale? Bring all the paperwork from the hardship to the resolution.
- If you are going for a VA loan you will need your Certificate of Eligibility. (And the name on the purchase contract needs to be exactly the same as the certificate)
- Do you have a lien or judgment that should be off your record? Bring the release with you just in case it hasn’t been properly removed.
- Quite often past due bills have to be paid off to get the loan. Or sometimes a balance needs to be paid down to bring your credit score up.
- Even if you are paying cash, you may need to pay off a liens before buying a new property.
- If you are moving to a new area and will have a job in the new area, you may need to show proof or even be on the job for a certain number of days before the lender will fund the purchase.
After the lender has pre-qualified you and have found your new home, your agent will need to provide information about the purchase. For example, a copy of the executed purchase contract. You should have a copy too. Your lender should tell you not to make purchases on credit or change jobs until after you close. The day of closing, the lender will verify employment and run a credit check.