What is Needed for a Pre-Approval?

Man shaking hands with realtor

By Diego Arteaga, Mortgage Loan Officer

Getting a mortgage might seem like an overwhelming task, but being prepared and having the right documentation upfront can make buying a home and obtaining a mortgage a smooth process. Getting pre-approved for a mortgage before you go home shopping isn’t required, but it is a good idea so your realtor knows what value of home to help you find and the seller knows you are a serious buyer.

When getting pre-approved, financial institutions want to see how likely you are to repay your mortgage; thus, they make their decision on three factors: income, assets and credit.

Once you are ready to get pre-approved, talking to a mortgage loan officer is the first step. The loan officer is going to ask for the following documentation at a minimum. It’s more than likely you have many of the documents on hand. If you are self-employed or have income from many sources, they may ask you for more documents. Note that the paperwork required to verify income depends on your personal situation:

  • W2’s – For the last two years for wage earners
  • Pay Stubs – One month of most recent pay stubs
  • Tax Returns – For the last two years with all schedules (for self-employed borrowers)
  • 1099 or Award Letters – For Pension or Social Security income
  • Bank Statements – Two months of most recent bank statements (all pages)
  • Other Assets – Most recent quarterly statement for retirement accounts, 401k, IRA and brokerage accounts
  • Student Loans – If income-based, you will need letter of new payment
  • Real Estate Debt – If your current home is mortgaged and you are refinancing, the lender will need your most recent billing statement and homeowners insurance declaration page. If a rental property, possibly a lease agreement
  • Divorce – Have your court divorce decree and any court orders for child support and alimony payments
  • Bankruptcy and Foreclosure – Ask your lender what documents are needed. Usually, they will ask for all your bankruptcy papers and the dismissal letter
  • Down Payment Gift Letter – Lenders will ask where you down payment is coming from. If your funds include gifts, you will need to get a letter from your donor showing they don’t expect to be paid back. Gift letters are not required for the pre-approval, but the proof of cash to close will make the process easier.

The mortgage loan officer should be able to determine the income and the assets that can be used to qualifying for a mortgage based on the documentation provided. The next step would be for the mortgage loan officer to pull credit. Many lenders pull from all three credit bureaus – Experian, Equifax and TransUnion. For this they will need your residence time for two years, your social security number and date of birth. Depending on the credit score, the mortgage loan officer should be able to determine the best program. The mortgage programs vary depending on credit score, down payment options, loan amounts, down payment assistance and debt ratio.

After the pre-approval is obtained, the borrower should have the peace of mind of knowing what program, what term and approximately what payment is qualified for.

Happy home shopping!