Getting preapproved for a mortgage before you go home shopping is not only a good idea but imperative in a market that is highly competitive. Unlike pre-qualification, a mortgage preapproval letter is usually only produced by true creditors (not brokers), and lends integrity to your offer, providing the seller insight and prediction that you have the ability to secure mortgage financing.
For preapproval, we will need to verify your income, credit history, employment, assets, and debt obligations, and it’s more than likely that you have many of the documents ready at hand. You will be asked to share information such as your Social Security number and your date of birth; and a 2-year history of your primary residence and employment history. This information will be needed for all borrowers and co-borrowers.
Here’s a list of documents you’ll need for underwriting pre-approval
Income and employment
The documents required to verify income depend largely on how you are compensated.
W-2 Wage Earners
Copies of W-2 forms and your most recent payroll stubs that reflect 30 days of earnings. If income includes overtime, bonuses or differential pay, you may need your most recent end-of-year payroll stub. However, recent technology innovations such as The Work Number online verification portal, are making the income verification process simple, fast and easy – and removes the requirement of paper documentation of income, for a large group of workers.
Self-employed borrowers, including sole proprietors, partnerships and S-corporations, will need to provide the most recent two years of income tax returns for the business, regardless of its legal structure. If the self-employment is recorded solely on the personal tax returns, then the most recent 2 years of filed federal 1040 returns, all pages, will be required.
Real Estate Owned
Provide 2 years of personal 1040 federal tax returns, including all real estate schedules and copies of the current mortgage statement, insurance policy declaration pages, and HOA statements to confirm monthly dues for all properties owned.
Assets are not always needed in refinance transactions. However, in purchase transactions, the funds necessary for the down payment and closing expenses are required and would consist of 2 months’ statements for any account used for this purpose, all pages.
Debt obligations are documented through the credit report list of liabilities; however, you are required to disclose any debts that are not showing on your credit report.
If the sources of funds you plan to use to purchase property if whole or in part from a gift, it will have to be documented as such. Gift letters, of which lenders have for your use, will show the gift donor, the amount of the gift, and the statement that the funds gifted are not expected to be repaid. The donor’s asset account will also be requested to confirm the ability of the donor to grant the gift.
Hopefully the day will come, when all income, assets, and liabilities can be verified online, in a secure way of course, to shorten processing times and lower costs of mortgage lending.
If residential real estate investing is part of your American dream, get to know your options. We can help. Contact a friendly and professional Empire of America direct lender today.