Your journey to homeownership is an exciting undertaking, but what about all the mortgage documents you’re required to send? Have no fear — we’re here to break down the most common documents needed to buy a home, and hopefully, it’ll become more manageable. Imagine that! Here is your guide to essential mortgage documents.
What is a mortgage document?
Generally speaking, a mortgage is an official agreement between a lender and a homebuyer to use the property as security to buy a home. The type of document and requirements may vary by state or loan type. For example, in some states you may use a security deed and in other states a deed of trust. The documents may be physical or electronic. Each milestone of your mortgage and homebuying journey comes with a set of documents pertaining to that step.
Documents needed for mortgage prequalification
Prequalifying for a mortgage helps you decide what type of mortgage you’ll likely qualify for by supplying information about your income, financial history and preferred mortgage terms. When you get pre-qualified, you may come across requests for the following types of documents or information:
- Monthly income
- Preferred loan amount and down payment
- Home and mailing address
- Co-applicants, if necessary
- Permission to review your credit report
- Information about assets and liabilities
Documents needed for a mortgage application
When you’re ready to apply for a mortgage, there are a few more steps to take. You may want to equip yourself with the following types of documents and information before embarking:
Credit history and score
Your lender will request permission to check your credit score, which reflects your credit history. Your credit score helps the lender determine how much risk you carry as a borrower.
Identity or status of resident
When you take out a mortgage, you may be required to supply a social security number to help establish identification or a green card, for example, to help set up your residency status in the United States. This type of information helps the lender and credit bureaus associate the mortgage application with your credit history and verify your eligibility to apply for a mortgage. It also helps the lender determine what other documents they might need to request.
Pay stubs or other proof of income
As the borrower, you’ll need to show proof of income to take out a mortgage. Without verifying the borrower’s employment or other forms of income, the lender cannot properly assess risk. So, lenders will typically ask for the past two years of your employment history. If you are self-employed or receive other forms of income, you may be required to provide other documents.
Your lender may wish to see tax returns to further verify your reported income and get a bigger picture of your financial history and current financial standing.
Bank statements, assets and liabilities
Just like proof of employment and tax returns, your bank statements, assets and liabilities help paint a picture of your finances. Lenders typically look for a healthy balance between assets and liabilities when assessing risk and how much they are comfortable lending.
If you rent before buying, your lender will likely ask for proof of rental payment from the last year or so, in case of any missed payments.
Gift letters are physical letters from people, typically family or friends, contributing money toward your loan so the lender doesn’t perceive the gifts as other loans that may affect your mortgage application.
Mortgage closing documents
Closing is the final step in your homebuying journey. You’ll see some of the most important mortgage documents in this step, like your closing disclosure, homeowners insurance, loan application documents, deed and title.
You'll typically receive a closing disclosure three business days before you close. This itemized list shows amount, in total, you'll pay at or before closing. It typically includes your loan amount, interest rate, loan term, origination fees, title insurance, deposits for property insurance and taxes, homeowners insurance and any other fees.
The lender will require proof of an active homeowners insurance policy so they know your assets, and therefore the loan, are better protected if anything unfortunate happens.
Original loan application documents
Your original loan application and the documents describing what your loan looks like will be presented to you at this step, to help ensure the mortgage you receive at closing is in line with what you’ve originally agreed upon.
Deed and title
The deed is the document that officially transfers home ownership from one party to another. The deed is typically signed by the party selling the property. Once you close on a home and the deed is signed, the title of the home can be transferred to the new homeowner.
Mortgage documents evidence that a lender has a security interest in a home. Each step in the mortgage application and homebuying journey comes with its own set of mortgage documents to help make homeownership a borrower’s reality.