Taking on your first mortgage might seem intimidating at first. After all, owning a home is a big investment, and it’s a lot of money to take out at once.
Here’s some good news: the vast majority of homeowners have to take on a mortgage, but many have successfully paid them off. In fact, around 40% of homes in the U.S. have their mortgage paid off in full, so why not set your goal and go for it?
Loan paperwork is the next step when preparing to apply for a mortgage. Again, it might seem like a lot at first, but it’s simpler than you may think.
Keep reading to learn all the loan paperwork you’ll need for a mortgage.
Applying for a Mortgage: What to Know Beforehand
A mortgage is a type of loan that is meant to help borrowers purchase a home and slowly pay it off over time. Before deciding on whether you’re approved, and for how much, lenders need loan paperwork and documents to ensure you’ll be able to pay it back.
Here’s the information that mortgage lenders look for:
Your Income and Employment History
A primary point of consideration for mortgage lenders is your income and history of employment.
There’s isn’t necessarily a set dollar amount to meet bank requirements, but they’ll need to know that you make enough to keep up with your payments. You’ll need to provide your work income as well as any other forms of income.
Mortgage lenders will also need to know of any other assets in your loan paperwork, including savings accounts and retirement accounts. This will help ensure that you can pay your mortgage, even if your income level changes.
Type of Property
Is it a residential home or an investment property? If you’re purchasing a secondary property to rent out, this carries a higher risk of defaulting on the loan.
Mortgage lenders will also want credit information with your loan paperwork. Your credit history as well as your credit score both paint a picture of how well you are able to manage your money.
Documents Needed for Loan Paperwork
Now that you know the information the lenders need, what documents will you need for your loan paperwork?
Here’s what lenders will ask for:
- Pay stubs and proof of other income (if you don’t get a pay stub, you can use an online pay stubs generator)
- Bank account statements and proof of other assets
- Tax returns
- Credit history
- Photo I.D.
- History of Rentals
If anyone is helping you pay for the mortgage, you’ll also need to prove that you received the money as a gift. This will reassure your mortgage lender that you have not taken out other loans that will need to be paid off.
Preparing to Apply for a Mortgage
Applying for a mortgage can be scary, especially if you’ve never done it before. However, with all the right qualifications, you can prove to your lender that you can pay the mortgage back. Now that you know the documents you’ll need for your loan paperwork, you’ll be ready to apply.
For more topics like this one, check out our other blog entries.