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When you’re applying for a mortgage, providing adequate documentation for a mortgage application can feel like an intimidating process. Depending on the situation, it could take you weeks to track down all the necessary documents and get them to your lender, only to be asked for more documentation. If you can’t get your documents submitted in a timely manner, it can seriously slow down the mortgage approval process. (Fortunately, Rocket Mortgage® by Quicken Loans makes the documentation process easy by allowing you to automatically share your financial information, speeding up the process and cutting down on the amount of paperwork you need to provide.)

While you may get frustrated after being asked to send over yet another verification of income, take heart that this process is meant to protect you from entering into a loan agreement you might not be able to uphold. Your mortgage lender wants to make sure they’re giving loans to borrowers who will be able to pay them back. It’s a process that protects you, the lender and the economy as a whole.

How can you be prepared going into the process, so that you spend less time hunting for paperwork and more time hunting for your dream home? Here are some of the basic documents you should have ready when you begin your mortgage application, to help you expedite the process of securing a home loan.

Income

Part of ensuring that you can pay your monthly mortgage payments is for your lender to verify that you have a steady and adequate source of income. This includes looking at your employment and earnings history, as well as considering any other funds that you receive regularly (such as alimony or child support).

Gaps in your employment history or changing jobs a lot may signal to an underwriter (the person who reviews all your documentation and decides if you’re approved for a mortgage) that you’re a riskier bet than someone who’s been at the same job for a decade, since any employment disruption can make it harder for you to make payments.

In addition to verifying that you’re employed, your lender will want to look at the past couple of years of your income history. Underwriters are interested in a steady income, so fluctuations could be problematic, even if your income is on the upswing. If your income goes back down to previous levels, will you still be able to make your payments? How likely is your income to remain at the level it is now and, with it, your ability to make mortgage payments? These are some of the questions an underwriter seeks to answer.

Here are some documents underwriters look at to verify your income:

  • Last two years of federal tax returns
  • Recent W-2s (going back two years) and recent pay stubs
  • 1099 forms and profit and loss statements (if you’re self-employed)
  • Divorce decree or other legal documentation verifying that alimony and/or child support payments will continue for at least three years following the mortgage application and proof of at least six months of regular payments prior to application

A common misconception with this part of the mortgage process is that it’s impossible for people with nontraditional forms of income to get a loan. While you may have to provide more supporting documentation, as long as you have it (and a history of bank statements showing the money has been deposited into your account) to back up your reliable and continuing source of funds, you shouldn’t have too much trouble using other forms of income to qualify for a mortgage.

Assets and Liabilities

Lenders want to be sure that you can make your mortgage payments even if you encounter financial troubles. To do this, underwriters look at your financial assets to determine if you have the cash – also referred to as liquid financial reserves – to cover the mortgage.

This cash can come in many different forms, including bank accounts, investment portfolios, retirement savings and even money gifted to you from a relative.

You’ll need to provide thorough documentation of any funds you plan on using to help you qualify:

  • Recent statements from any account (e.g., checking or savings accounts, investment portfolios, trust accounts) with readily available funds, going back at least 60 days or the most recent quarterly statement
  • Most recent retirement account statements
  • Proof, such as a copy of both the check and the deposit slip, that gift funds are in your account
  • Signed letter from gift giver that includes a statement verifying that no repayment is expected
  • Documents surrounding the sale of assets – proof of ownership, independent verification of the asset’s value, proof of transfer of ownership (such as a bill of sale and something, such as a deposit slip, showing that you received the proceeds)

Your lender also look at your liabilities, or debts you owe, to determine how much money you’re required to regularly pay to various creditors. For this, a lender may ask for supplemental information about any long-term debts you owe, such as car or student loans.

Credit

Your credit history will be a big factor in determining whether you are approved for a loan and the terms you’re offered if you are.

For this step, you’ll need to provide your lender with verbal or written permission to pull your credit report. They’ll look at your credit history and decide your level of creditworthiness. With certain events, such as bankruptcy or foreclosure, you’ll have to wait a certain number of years before you are considered eligible for a home loan.

If there were any extenuating circumstances that led to some bad marks on your credit report, there are a few things you can provide to help make the case that a negative event was out of your control and a one-time occurrence. This includes:

  • Documents that confirm the event, such as medical bills or a layoff notice
  • A letter of explanation that explains the documentation provided and illustrates what happened and why you couldn’t resolve the situation without taking a credit hit

In addition to looking at your credit report, if you’re currently a renter, your lender may ask you to provide proof of rent payments for the last 12 months, confirmed through canceled checks, bank statements or landlord verification.

Keep in mind that additional documentation may be required depending on your specific situation. It’s important to discuss with your lender the required documents needed to see your loan through to completion.

Ready to start the process but intimidated by all the paperwork involved? Rocket Mortgage® by Quicken Loans makes the mortgage application process easy. Get started online or talk to one of our Home Loan Experts at (800) 785-4788.

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This Post Has 14 Comments

  1. Hi, my wife and I are first time home buyers. We have decent credit scores (above 680) no late or delinquent payments on anything we have. However I dont have 2 years work history at my job and was actually out of work a few months ago but my wife does have 3 years at her current employer. My concern is the DTI. Would my debts have to be factored in even if I do not want to be on the loan? Also are there any special loan programs availiable with QL for first time home buyers?

    1. Hi Steve:

      It’s hard to give you a definitive answer on the DTI question without knowing more, but I can tell you what goes into that. If you live in a community property state and are getting an FHA or VA loan, your debts would have to be factored into her DTI. If you go with a conventional loan, your debts aren’t factored in as long as she’s the only one on the loan.

      The only program we have that’s specific to first-time home buyers is one through Fannie Mae where you can get closing cost assistance if you buy a property owned by Fannie Mae. All of our other programs are open to everybody. If you’d like to go over your options, you can get a preapproval online through Rocket Mortgage. Otherwise, one of our Home Loan Experts would be happy to help find the loan program that’s right for you if you give us a call at (888) 980-6716.

      Thanks,
      Kevin Graham

  2. Sir, We are new in USA, have spent less than 2 yrs in the US so have less than 2 yrs of work experience.. We have excellent credit score though. Will we qualify for the loan Pre approval.

    1. Hi Maria:

      I can’t comment on your chances for preapproval on the blog because we would have to look into your situation. One of our Home Loan Experts would be better able to advise you on this. You can get in touch with them by filling out this form or calling (888) 980-6716.

      Thanks,
      Kevin Graham

  3. The matrix comment that being strong in 3 areas is not true. I have been in the same job for 3 years. I am only 26. So this is not too bad given my age.. I had the downpayment up of 10 percent and had assets worth half the house I was interested in. Which historically had an upwards trend in value even in recent years. My credit admittedly is not the best. But no late payments in the last 2 years and credit cards under 30 percent. Strong in 3 areas but your Matrix dqs people purely on the credit side. No consideration given on the other fronts.

    1. Hi Adam:

      I understand your frustration. Unfortunately, mortgage investors do require a minimum credit score in order to accept loans from us. The good news is, credit is something that can be worked on. I’m going to have someone reach out to you to help go over your personal situation, but in the meantime, here’s a blog post with tips on how to build that score back up.

      Thanks,
      Kevin Graham

  4. I am applying for a refinance of a home. I have excellent credit, loan to debt radio is excellent. bills always paid on time. I have worked at the same job for almost 40 years. My daughter rents a room out ($300 a month) and now the underwriters want me to show proof I live in the home. I have given them any and all documentation that I have except the two things they are asking for which is a Cable and Landline phone which I do not have. How would that be prove I live here??”

    I have provided utility bills, credit cards, car notes, savings, checking accounts, car insurance, car insurance billing each month, W-2’s, Pay stubs, etc. and they still are not accepting proof I live in the home. The one thing I did not give them was medical bills which is a privacy act on my part or is this something they want too. They are requesting a cable and Landline. ????? I am totally confused and frustrated if this is how a customer is to be treated. With todays society allot of people do not even have internet and/or landlines. I find this unbelievable as a requirement to finance a loan. It was explained to me that is a Fannie Mae Requirement. Can you provide me with that information that states this is a requirement, Thanking you in advance.

    1. Thanks for your message, Judy. Our team is looking into how we can best assist you. Our client relations team will send you an email to get some more information.

  5. I am legally married but have been separated over a year and I want to get a home mortgage by myself. Can I still apply or what do I have to do.

    1. Hello, Mayra! I’ve sent your question to our home loan experts, and they’ll be sending you an email shortly. In the meantime, take a look at this article for more information: http://bit.ly/1t5OUGq. Have a good day!

  6. Question: What if a couple is legally separated and one of them tries to apply for mortgage on a different home with someone else, who is not yet divorced – would this pose a problem for an underwriter? Thanks!

    1. Hi bbqpitmaster! I’ve passed this on to our team of mortgage experts who will reach out with more info.

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