How to Prepare For a Mortgage Like a Pro

Before you shop for a new home, prepare to qualify for a mortgage loan. Preparing will help eliminate confusion while ensuring that the process goes as smoothly as possible. 

There are six factors reviewed during approval process (excluding the home appraisal):

1. Residence History

Documentation for the past two years of residency should include your landlord’s or current mortgage company's name, address, and phone number. You may also be asked to provide twelve months of canceled rent checks if the landlord is a private individual.

2. Employment History

The past two years of employment history should include the employer's name, address, phone number, and the dates of employment. Any notable unemployment periods during those two years may have an adverse effect on your approval.

3. Income

Show proof of income by providing the most recent pay stubs for the past 30 days as well as your W-2's from the previous two years. Overtime and bonuses may not be considered as part of your income if your employer does not guarantee this income. 

Also, if you have any business expenses listed on your tax returns, they will likely be deducted from your income.

4. Bank Accounts

Be prepared to show bank statement for the past two years and explain any large deposits into your within 60 days of applying for your loan. Retirement accounts are also important in the application decision since the reserves or assets in the account can influence your mortgage approval.

5. Credit History

Review your credit report before applying for a home loan to verify the information on it. The areas to look over on your credit report include:

Collections

Judgments

Authorized user accounts

Cosigned loans

Any inaccuracies

You'll also want to check that your credit score is adequate for the loan type you are applying for

6. Tax Returns

Have on hand your tax return for the previous two years. Your tax returns will be reviewed for any deductions that may affect your qualification including deductions for part-time employment, self-employment, rental income or loss, annuity income, or any consistent income.

There may be different guidelines for loan approval regarding past bankruptcies, foreclosures, and short sales. 

Car repossessions, judgments, liens, collections, late payments, and credit inquiries can also have an impact on qualifying for a mortgage.  As can auto loans, student loans, installment loans, credit cards, child support, and alimony. 

Gather all the documentation needed before applying for a loan as missing documents can cause delays. 

Remember, the basic documents you'll need are:

• Most recent 30 days’ pay stubs
• Most recent two months' bank statements 
• Previous two years of federal tax returns and W-2s
• Past two years of residence history 
• Past two years employment history or any periods of unemployment
• Separation, divorce, and child support paperwork 
• Bankruptcy (if occurred in the past seven years)
• For the self-employed, you may need your last two years of business returns
• Depending on the loan you're applying for, other documents may be required

Having these essential documents available eliminates frustration and delays, as is choosing a trusted mortgage professional. 

Michael Zuren, PhD

I have 25 years experience in the mortgage banking industry. My experience includes the following loan types: (1) HomePath, (2) OHFA, (3) FHA 203k, (4) VA, and (5) USDA financing. I have been serving Cuyahoga, Lake, Geauga, and Ashtabula counties in Northern Ohio... more