Here’s What Lenders Look At When Applying For A Mortgage

Gone are the days of those so-called “liar loans” that helped pump up the housing bubble of the mid-2000s. It seemed your simple signature was about all that was needed to get a home loan. Today, lenders are much more thorough in determining a potential borrower’s qualification for a home loan. Here is the bulk of information they will look at and verify before approving a loan:

1. Residence History

Documentation for the past two years of residency should include your landlord’s or current mortgage company’s name, address, and phone number. You may also be asked to provide twelve months of canceled rent checks if the landlord is a private individual.

2. Employment History

The past two years of employment history should include the employer’s name, address, phone number, and the dates of employment. Any notable unemployment periods during those two years may have an adverse effect on your approval. Any yes, they will verify your current employment.

3. Income

Show proof of income by providing the most recent pay stubs for the past 30 days as well as your W-2’s from the previous two years. Overtime and bonuses may not be considered as part of your income if your employer does not guarantee this income. Also, if you have any business expenses listed on your tax returns, they will likely be deducted from your income.

what lenders look for to approve a home loan4. Bank Accounts

Be prepared to show bank statement for the past two years and explain any large deposits into your within 60 days of applying for your loan. Retirement accounts are also important in the application decision since the reserves or assets in the account can influence your mortgage approval.

5. Credit History

Review your credit report before applying for a home loan to verify the information on it. The areas to look over on your credit report include:

  • Collections
  • Judgments
  • Authorized user accounts
  • Cosigned loans
  • Any inaccuracies

You’ll also want to check that your credit score is adequate for the loan type you are applying for

6. Tax Returns

Have on hand your tax return for the previous two years. Your tax returns will be reviewed for any deductions that may affect your qualification including deductions for part-time employment, self-employment, rental income or loss, annuity income, or any consistent income.

There may be different guidelines for loan approval regarding past bankruptcies, foreclosures, and short sales depending on which loan program you’re applying for. Car repossessions, judgments, liens, collections, late payments, and credit inquiries can also have an impact on qualifying for a mortgage –as do auto loans, student loans, installment loans, credit cards, child support, and alimony.

Gather all the documentation needed before applying for a loan as missing documents can cause delays.

Here are the basic documents you’ll need:

  • Most recent 30 days’ pay stubs
  • Most recent two months’ bank statements
  • Previous two years of federal tax returns and W-2s
  • Past two years of residence history
  • Past two years employment history or any periods of unemployment
  • Separation, divorce, and child support paperwork
  • Bankruptcy (if occurred in the past seven years)
  • For the self-employed, you may need your last two years of business returns
  • Depending on the loan you’re applying for, other documents may be required

Having these essential documents reduces frustration and delays, as does a trusted mortgage professional.


Ryan Blanco-Realtor-San Diego Real Estate BlogAbout Me: I am a full time agent and I dedicate 100% of myself and my time to my valued clients in addition to the San Diego communities that I serve. It is imperative that I continuously evolve with local and national trends in addition to always looking ahead of the industry. It is a must to always provide the best service to my clients, their families and friends.




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