Documents for pre-approval
What’s Needed for Pre-Approval
While getting pre-approved for a home mortgage before you go house hunting isn’t required, it is highly recommended. Why?
Firstly, the pre-approval process gives you an estimate of how much house you can actually afford. This allows homebuyers a price range in which to look for in their hunt, letting them know what is in their budget.
Secondly, the loan approval process can be slow if you start from scratch. If the home you want is on the line, you don’t want to have to get stuck waiting on paperwork. By getting your pre-approval documents ready, you can speed up the process!
Ready to get started? Here is a complete list of the documents needed for pre-approval.
Your category of work and how you get paid will determine the type of documents you need to supply for a home mortgage. If you are unsure which one applies to you, we recommend looking at your latest tax return.
Traditional workers with an hourly or annual wage get a W-2 form at the end of the year. The form may also include overtime, bonuses, or differential pay. In addition to previous W-2 records, we will likely also ask you for the last 30 days’ current paystubs for all borrowers (leave & earnings statement if military).
1099 forms are supplied to freelancers, independent contractors, and self-employed individuals, including sole proprietors, partnerships, and S-corporations. 1099 workers will often have a form for each client or income source and will likely need to supply year-to-date profit and loss statements and two years of personal and business tax returns.
- Real Estate Income:
If you have a rental property that collects income, you will need to document the property information, rental income, and market value.
Asset proof is requested when applying for a home loan to ensure that the borrower has the money they claim to have. If lenders were not to check, the borrower could be at risk of defaulting on the loan, costing the lender money and putting the borrower at risk of losing their home. By thoroughly checking the following, this situation can be avoided and guarantee that the borrower is in the clear for a smooth payment transition.
- Bank Statements:
To ensure you have the required funding to finance your loan, we request access to the last two most recent month’s statements for bank accounts documenting funds as stated on your loan application.
- Retirement Accounts
If you have a retirement fund, such as an IRA, we request access to the last two most recent month’s statements for retirement accounts documenting funds as stated on your loan application.
- Investment Accounts
As with the above two, if you have an investment account, we will request access to the last two most recent month’s statements for investment accounts documenting funds as stated on your loan application.
In addition to checking the money you have coming in and squirreled away, we will also check your existing debt and calculate your debt-to-income ratio (DTI). The type of loan you get will determine what DTI ratio you must achieve.
To determine DTI, we will calculate your monthly debt payments and divide them by your gross monthly income. Monthly debts will include auto loans, student loans, credit card debt, and existing home loans as well as an estimated new home mortgage payment. We may also require that you include any alimony and child support obligation or income with a divorcee decree and/or parenting plan if you have one.
We at Desert Canyon understand that everyone is unique. We do not discriminate against your situation. We will simply need the following documents needed for pre-approval if you have them:
- Award letters for Social Security, disability, retirement and/or pension income as stated on your loan application.
- Bankruptcy, foreclosure, loan modification, or short sale documentation if needed.
- DD214 statement of service (VA Loans ONLY)
To ensure that our borrowers can stay timely with their payment plan, we want to verify that they have stable employment. To do this, we will request the last two years’ W2s or for all borrowers documenting your employment history as stated on your loan application. We may also check your current paystubs as well as call your current employer. If you recently switched jobs, they would likely contact your previous employer. If you are self-employed, you may need to provide additional paperwork about your business, income, and projected sales.
Before giving out any loan, a lender will want to verify that you are whom you say you are! Therefore, you will be required to present a copy of your driver’s license or state ID card, your social security number, and your signature.
For a printable checklist of the documents required to apply for a Desert Canyon Loan, please click HERE!
Ready to get started? Get a quote today to learn more!