What Do I Need to Qualify for a Mortgage?

Qualifying for a mortgage is possibly the most complex step of buying a home. You first have to strengthen your credit score and review your full credit report in preparation for qualification, along with shopping around for a lender. Lenders may offer conditional approvals, only to drag you along in the process for longer than you may have imagined it would take. To speed things up for you, below is a list of documentation you’ll need as you prepare to apply for a mortgage. 

What You Need to Qualify for a Mortgage

There are several pieces of documentation you will need when you are preparing to qualify for a home mortgage. All this paperwork may seem excessive, but it is imperative for your lender that you provide it all (and possibly more), as it serves as a demonstration of your financial habits and fidelity as a borrower. A healthy credit report and stable financial history signal to lenders that you will successfully and consistently repay your loan. This will improve your chances of securing a mortgage that best suits your needs, especially those with low interest rates.

Before you get ready to shop around for a mortgage, you’ll need the following:

  • Government-issued photo identification. This one is easy, of course. It is simply a confirmation to lenders of your identity, so they can match all of your financial documents to your name. 
  • Proof of income. Your lender needs to see that you have a stable income. Any anomalies, such as irregular deposits of a few hundred dollars or more, will catch their eye right away, and you may need to provide the source of those deposits and an explanation as to why they were sent. (Note: Your housing costs should only amount to a maximum of 38% of your monthly income before tax, although some lenders may allow up to 31%.)
  • Tax returns. It is highly likely that your lender will ask for your tax returns. This allows them to confirm on a greater scale that your income is stable – some may go back as far as 2 years. For this, you’ll need to sign a Form 4506-T, which allows third-party access to your tax returns. 
  • Credit report. Your lender will need to review your credit report to get a sense of your consistency with repaying debt. They will check both your credit history and score to determine your eligibility to borrow from them. (Note: Accumulation of credit inquiries, as well as the presence of collections or a low number of accounts in your name, can hurt your score.)
  • Renter’s history. This is especially important to those with a short credit history. Your lender needs this, again, to confirm your ability to pay your mortgage consistently. 

Further Details on Qualifying for a Mortgage

Know that when your lender is reviewing these documents, they will also be noting your debt-to-income ratio. If your debt far exceeds your income, you will likely not qualify and may need to pay down some of those debts before you officially apply. There are many different types of loans you can procure when homebuying, each of which has unique requirements for down payments and other criteria. Some of these loan types are:

  • FHA Loans
  • USDA Loans
  • Conventional Loans
  • VA Loans

Look into the type of loan that will best suit you and get the help of a mortgage professional. They will assist you in fully preparing for mortgage applications and ensure you get the best deal for your income.