If not done properly, applying for a mortgage can be stressful and time consuming, but with the right preparation the entire process can be seamless. Here are some crucial pieces of information that almost any lender will require before approving a mortgage.

Tax Information From The Previous Two Years

One of the most important documents a borrower will be asked for is their federal tax return along with a signed Form 4506-T, which will allow the lender to contact the IRS directly for their version of the federal tax return to compare to the ones provided. This allows them to examine the documents for any sign of fraud.

Documentation On All Owned Assets

The mortgage lender will require proof of every current asset owned by the borrower. This will include any current real estate titles along with bank and mutual fund statements and documentation on current investments. Don’t be shy, every asset owned is a better sign to the lender.

Documentation On All Owed Debts

On the opposite side of the coin, the mortgage lender will also want to be made aware of any current debt. All debts, from major student loans to miniscule credit card debts, will need to be documented and given to the lender. It’s important to provide information on monthly payments that need to be made, even if it appears insignificant.

Two Years Of W-2s For Employed Borrowers

Almost every lender will require a Form W-2 for the previous business year to see how much income was earned by the borrower. Many will require at least two years’ worth of W-2s to see if the income has been consistent.

Two Years Of 1099s For Self-Employed Borrowers

Alternatively, any self-employed borrowers will be required to provide profit and loss statements to show the current status of their business. Like W-2s, the lender may require documents showing profit and losses for at least two years if the business has been in existence that long.

Having all your documents ready in advance to applying for a mortgage can go a long way to helping the process go smoothly. The documents needed for a mortgage change from person to person depending on their situation, so make sure you speak with a qualified mortgage professional in advance to get a better idea of which documents you will need to supply.

Being pre-approved for a mortgage isn’t just a way to get a step ahead, in many cases it’s a necessity to buying a home. Many sellers don’t want to go through the negotiation process of selling their home only to have the buyer drop out when they can’t get approval for the mortgage they were relying on.

The Difference Between Pre-Qualification And Pre-Approval

Pre-qualification is a faster process than pre-approval and is usually a best estimate based on how the borrower answers certain questions about their financial history and status.

Pre-approval is way more valuable to a borrower than pre-qualification because it is a commitment from a lender for a decided amount after they have completed an in-depth verification process based on the submitted documentation.

Preparing For The Pre-Approval Process

The majority of lenders will require the same documentation in order to pre-approve anybody for a mortgage, but there is more information they will need in certain cases.

Anybody applying for a pre-approval will need to ready at least two years’ worth of financial information, including W-2s, Form 1099s and federal tax returns as well as current banking and financial records.

Here is where the pre-approval process gets more in-depth, not only will the lender need to see how much money the applicant has in their bank, but they will need proof as to where the money came from. The lender will need to know the difference between income, gifts or investment withdrawals to help them make their decision.

Having this information ready in advance will speed up the process significantly.

Prepare Proof Of Assets And Allow A Credit Check

Applicants will be required to prove ownership of all assets and will need a letter to prove that any cash gifts given to them to assist with the payment are not loans that need to be paid back. This is important information that will help a lender make a decision, so having the letter ready will save a lot of time.

The lender will also need to check the applicant’s credit to compare it to the applicant’s income. Many people refuse the credit check because they are afraid it will impact their credit score, but the impact is very low and the lender needs this information. It is also a good way to learn about any errors in the credit report early, before they can pose a problem down the line.

The process is not nearly as intimidating as it appears, and an experienced mortgage specialist can help you prepare everything you need well in advance of applying for pre-approval.