Applying for a mortgage can be a lesson in patience. To get approval, you need to dot all of your I's and cross your T's. If you want your application to go smoothly, it’s best to be sure that you’re coming with everything the lender needs to make a decision. To make it easier for you, we’ve put together this list of the basics. Most of them are required whether you’re applying for a pre-approval or for the actual mortgage. If you already have the pre-approval, you may only need to bring some updated versions of the things that you’ve already submitted.
In the hassle of gathering all of the usual paperwork required for the mortgage, it’s not unusual for people to forget about the application itself. Sometimes, you’re able to fill this out online, then bring the documents in person. Many lenders have a paper form to fill out though, and you’ll want to bring this with you.
Proof of Income
The proof of income is the most important thing you’ll need to bring. This is going to make or break the bank’s decision to approve your application, and it’s the biggest deciding factor when it comes to determining how much money the bank will lend you for your home.
For most people, a copy of last year’s tax return and a few recent pay stubs should do the trick. If you have a job where you get a lot of overtime or bonus pay, that usually doesn’t count in the bank’s calculations, so you may need to show pay stubs that don’t include this. Self-employed home buyers may need to prove income with additional tax forms, bank statements showing regular deposits, or other documents that can prove income.
Additionally, don’t be shy about including forms of income that aren’t employment-based, such as child support, alimony, a pension, disability income, or investment income. These forms of income are also allowed, and they can increase the amount of money that the bank will approve for your loan.
Proof of Down Payment and Closing Costs
You need to have at least 5 percent of the cost of your home for your down payment, and it’s better to have more. This money needs to be in a liquid form, such as in a chequing or savings account. If the money you have for your down payment is currently tied up in paper assets, for instance, you’ll need to sell those assets to show that you have money in the bank that you’ll use for the down payment.
If someone like a relative has gifted you money that you’ll be using for the down payment, you’ll need a statement from them specifying that the money was given and that it was not a loan that needs to be repaid.
Remember that you’ll also need to cover the closing costs on the mortgage. In general, these will cost about 2 to 5 percent of the cost of the home, and you’ll probably need to prove to the bank that you have money in your account to cover these costs. However, there’s usually some time between the original mortgage approval and the time that you have to pay those closing costs, so the bank may be a bit lenient if you’re slightly short. If in doubt, it’s best to ask.
Those who are only applying for a mortgage pre-approval won’t have this yet, but if you’re applying for your actual mortgage, you’re going to need some details about the property. This will include your purchase agreement and a copy of the listing.
You’ll also need to provide names and contact information for all of the people involved, including your builder, lawyers, insurance providers, and other such professionals. The bank uses this information to determine the value of the property. They’ll usually require inspections, and most builders are happy to comply with this. When it comes to brand-new homes, it’s usually understood that the prices are accurate. Those buying resale homes, though, may need to be concerned about the home being valued for less than the price they offered the seller.
Of course, each lender has their own mortgage rules. Our list covers most of the things that we’d expect you to need, but it’s always best to get a precise list of necessary documents from the lender before you apply. As long as you carefully check that you have everything on the list, your application should go smoothly.