Mortgage Approval: What You Need to Make It through the Process Unscathed

You've created a budget and know exactly how much you can afford to pay each month. You've done your due diligence, understand the hard costs you'll pay on a home loan, and have saved for the unexpected. Now it's time to approach a lender for a mortgage. What do you need to do to ensure that you can make it through the mortgage approval process unscathed?

Get Your Documents Together

The first step in the mortgage approval process is all on you, and has nothing to do with the lender (other than ensuring that you can provide them with the information they need). You'll need to gather all the important documents that the lender will require. Without these documents and the information they contain, you cannot be approved for a mortgage. So, what will you need? While some situations may require additional documents, you'll need at least the following:

  • Proof of employment for the past two years at a minimum
  • Proof of pay for at least the last 30 days (pay stubs)
  • Tax returns for the past two years or more
  • Bank statements, earning statements and any other documents proving financial income (child support payments, alimony payments, etc.)
  • A list of all debts you have, including credit cards, student loans and more.
  • An inventory of all assets you own (investments, real estate, car titles, etc.)
  • Signed IRS Form 4506-T

Get Preapproval

The next step in mortgage approval is actually to apply for preapproval. Do this before you start looking for homes. Preapproval is not the same thing as approval, but it does eliminate some of the steps on the path. In addition, it will give you an idea of what you'll be allowed to borrow from the lender, ensuring that you're able to shop for homes within your budget. Once you have been preapproved, the rest of the approval process is usually relatively fast, but it may pay to go ahead and start that now, as well.

Be Prepared and Have Patience

Perhaps the most important mortgage approval tip is this: be patient, and be prepared. It's called the "mortgage approval process" for a reason. It is a process. It takes time. There's more involved than simply rubber stamping your application with "approved" or "denied". The lender needs to ensure that they are making a smart choice by taking you on as a risk, and that may include communicating with the IRS, investigating assets you claim to own, and more. Remember that the lender is in business to make money, and they need to limit their exposure to risk in order to do that.

Ultimately, the mortgage approval process can be lengthy, but if you go into it prepared, with the documentation necessary, and are able to start the approval/preapproval process, you'll find that it is not as onerous as it sounds. Within just a short time, you'll be out on the market looking at homes to purchase.