Ultimate mortgage preapproval checklist

Mortgage preapproval from a lender tells you how much they’re willing to lend you to buy a home. While it’s not the same as a final loan offer, mortgage preapproval, sometimes referred to by Rocket Mortgage as initial mortgage preapproval, gives you an idea of how much house you can afford. It also shows sellers you’re serious about buying and likely able to get financing. Many sellers require you to get preapproved for a mortgage before they’ll accept an offer.

What documents do you need for mortgage preapproval?

To issue you a mortgage preapproval, your lender will need to see a variety of different financial documents that show you can afford your mortgage. Your lender will want to confirm that you have the income and assets to keep up with your mortgage payments.

Keep in mind that there’s a difference between mortgage prequalification and preapproval. Prequalification relies on self-reported data and gives potential buyers a rough estimate of how much they can afford to borrow while preapprovals are based on a more in-depth analysis of your finances and provide a more tailored estimate.

If you’re ready to get mortgage preapproval, borrowers will need to have some or all of the following items ready to go:

• Personal identification (passport, driver’s license, birth certificate, etc.)
• Social Security card (not just the number)
• Recent pay stubs
• Recent bank statements
• Tax documents
• Investment account statements
• A list of monthly debts
• Rental information and landlord references
• Gift letter (if applicable)
• Credit report

10 documents needed for mortgage preapproval

Let’s take a closer look at each of the documents you’ll likely need to give your lender and why they’re necessary.

Personal identification

The mortgage lender will want to make sure they’re lending to the right person, not someone pretending to be you. The ID you provide must be government-issued and include a photo. Acceptable forms of ID include a state-issued driver’s license, ID card, passport, or U.S. permanent resident card.

Social Security card

Lenders can use the Social Security card to match your Social Security number with your picture ID to further confirm your identity. You’ll also need the card for your Social Security number, which lenders will use to run a credit check.

Pay stubs

Your most recent pay stubs show lenders that you’re employed and have enough income to make mortgage payments. Lenders typically ask to see pay stubs from at least the last 30 days. If you’re paid via direct deposit, your company should have electronic copies of your stubs. However, if you’re paid with a physical check, you should make a copy of the actual stub and send it to the lender.

If you’ve recently changed jobs, the process might be a little more complicated. Lenders love consistency when it comes to employment, so if your new job is in the same industry and comes with similar pay, the process can proceed as expected. A change in industry or pay structure might prompt them to reassess your situation.

Bank statements

Bank statements help verify your income and show you have enough cash reserves to afford your mortgage if you experience an interruption in your employment. Your bank statements also show you have enough money saved to cover your down payment and closing costs. You’ll generally be asked for checking and savings account statements for the last 2 months. Lenders might want you to have up to 6 months of reserves available.

Tax documents

Tax documents are another way to verify your income and show how much you had taken out in taxes. You’ll likely need to provide your tax returns and W-2s for any employers you’ve worked for in the past 2 years. While you should keep a copy of these documents, you may be able to request tax transcripts and tax returns from the IRS if you’re missing anything.

If you’re self-employed, you’ll need to supply your business tax returns for the last two years, your profit-and-loss statement, and balance sheet for the current year.

Investment account statements

Savings and checking accounts aren’t the only places people keep their money, and your job may not be your only income source. There are many types of assets to include on your mortgage application, including 401(k)s, 403(b)s, IRAs, stocks, bonds, and mutual funds. Lenders will need to review your investment account statements from at least the last 2 months.

List of monthly debts

Debt-to-income ratio (DTI) is a metric that compares your monthly debt payments to your income to assess your ability to make mortgage payments. You can calculate your DTI by adding up all your monthly debt payments and dividing that number by your gross monthly income.

The maximum DTI allowed for mortgage approval varies with the type of loan you’re seeking. While it’s possible to get a mortgage with a DTI as high as 50%, it’s advisable to keep your DTI below 36%.

Your lender will ask for a list of your fixed debts, which are those that are regular, recurring, and have a minimum required payment. These debts may include:

• Rent or mortgage
• Car loans
• Student loans
• Credit cards
• Personal loans
• Homeowners insurance

A Verified Approval¹ from Rocket Mortgage will follow some of these same steps when it’s time to assess your financial situation. Rocket Mortgage will look at your DTI ratio and credit score to ensure you’re qualified for a home loan. One of our underwriters will also review your information.

Credit report

Your credit report provides insight into the type of borrower you are and how well you have managed repaying your debt in the past. Lenders will also use your credit report to determine your mortgage rate and the amount they’ll lend to you. Some red flags lenders look for on your credit report include:

• Missed payments
• Large debt balances
• High credit utilization
• Past bankruptcy or collections

While the lender pulls the report on their own once they have your permission, it’s wise to review your credit score beforehand to make sure you’re in a good position to qualify for a loan. In many cases, you’ll need a credit score of at least 620 for a mortgage preapproval, especially for a conventional loan. A free copy of your credit report can be obtained from each of the three major credit bureaus at AnnualCreditReport.com.

Rental information and landlord references

If you rent your current residence, you’ll likely be required to show a history of on-time rent payments. You may also be required to include the names and contact information of your previous landlords. This will help the lender verify you’ve paid your rent on time and upheld your financial responsibilities as a tenant. How far back you’ll need to show evidence of payments or landlord information will vary by lender.

Gift letters

If a loved one gives you money to use as a down payment, you’ll need a gift letter to prove the money isn’t a personal loan that you’ll need to repay. A personal loan would increase your DTI and possibly make it harder for you to pay back your mortgage.

A typical gift letter will include:

• The giver’s name, contact information, and relation to the recipient
• The recipient’s name and contact information
• The gift amount and date the gift was or will be received
• How the recipient will use the gift money
• Confirmation that the gift doesn’t need to be repaid
• Address of the home being purchased
• Signatures of the donor and recipient

Know the gift money rules

Certain loan programs have rules regarding who you can receive gift money from. For example, conventional loans only allow gifts from family members, but Fannie Mae and Freddie Mac also allow godparents, relatives of domestic partners, and former relatives to give gifts. Federal Housing Administration (FHA) loans allow gifts from employers, labor unions, most family members, and first-time home buyer programs.

Additional documents you’ll need if you already own a home

If you already own a home and are applying for a mortgage to purchase investment real estate or a vacation property, you’ll need to provide recent mortgage statements for your current house. This will show the equity in your home, along with your principal balance and monthly payment. To view your mortgage statement, contact your lender or pull it up on their website.

These documents will also help the lender determine your DTI ratio and whether you can afford an additional mortgage payment. They’re especially important if you have a loan on your current home and this will be an additional mortgage. If you already own a rental property, lenders will also want information on the income it generates and the maintenance expenses.

Additional documents you’ll need if you’re self-employed

If you’re applying for a mortgage while self-employed or owning a business, you’ll also typically be required to provide the following documents:

• Business tax returns for the past 1 – 2 years
• Current year profit-and-loss statement
• Current year balance sheet
• Business bank statements
• Other business financial records or licenses
• Any additional business income

Additional documents you’ll need for VA loans

The documents listed above are typically required for both conventional and non-conventional loans. However, some non-conventional loans may require additional documents for the mortgage process.

For example, only active-duty military members, veterans, and surviving spouses are eligible for a VA loan.² In order to get this type of mortgage, you’ll need to provide further documentation to verify your eligibility. Depending on the borrower, such forms may include:

• Statement of Service
• DD Form 214
• Retirement Points Statement (NGB Form 23)

FAQ

Here are the answers to some frequently asked questions about mortgage preapproval.

What is the first step of getting a mortgage preapproval?

The first step of the preapproval process is to review your finances and make sure you meet the requirements. Assess your credit score, savings, income and debt to see if getting preapproved is a realistic possibility. Your lender will eventually evaluate these factors, but doing so before starting the process can save you some time if it turns out that you don’t meet the requirements.

How can I increase my chances of getting preapproved?

Saving up for a larger down payment, improving your credit score, reducing your debt, and ensuring your income is stable and sufficient can improve your chances of getting preapproved.

How does a mortgage preapproval affect my credit?

Mortgage preapproval requires a hard credit pull that will temporarily hurt your credit score. However, if you are shopping around between lenders and multiple hard credit inquiries are made in the same time frame, it’ll only count as one inquiry.

Can I be denied a home loan after preapproval?

Mortgage preapproval does not guarantee that you’ll be approved for a loan. Changes in your income, credit score, or debt during the underwriting process are common reasons for mortgage preapproval denial.

Does a mortgage preapproval expire?

Mortgage preapproval from a lender typically expires within 30 to 60 days, so it’s best to hold off on getting preapproved until you’re serious about buying. Once this step is completed, it’s time to find a real estate agent.

The bottom line: Gather your mortgage preapproval documents in advance

Before a lender can preapprove you for a mortgage, they’ll need to confirm that you’ll be able to pay back your loan and aren’t too much of a lending risk. Knowing which documents you need and having them ready will make for a smoother process. Your lender will request documents to verify your income, credit, assets, and debts before issuing you a mortgage preapproval, so gathering these documents in advance can help you figure out how much home you can afford and expedite the preapproval process.

If you’re ready to buy a home, gather your documents and apply for a mortgage preapproval with a Rocket Mortgage Home Loan Expert.

¹Participation in the Verified Approval program is based on an underwriter’s comprehensive analysis of your credit, income, employment status, assets and debt. If new information materially changes the underwriting decision resulting in a denial of your credit request, if the loan fails to close for a reason outside of Rocket Mortgage’s control, including, but not limited to satisfactory insurance, appraisal and title report/search, or if you no longer want to proceed with the loan, your participation in the program will be discontinued. If your eligibility in the program does not change and your mortgage loan does not close due to a Rocket Mortgage error, you will receive the $1,000. This offer does not apply to new purchase loans submitted to Rocket Mortgage through a mortgage broker. Rocket Mortgage reserves the right to cancel this offer at any time. Acceptance of this offer constitutes the acceptance of these terms and conditions, which are subject to change at the sole discretion of Rocket Mortgage. Additional conditions or exclusions may apply.

²Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.