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Applying for a mortgage is not a decision most people make on a whim. Purchasing a home is one of the most significant financial milestones in a person’s life, and it requires careful planning and preparation. While many prospective buyers understand the importance of researching and comparing mortgage options, there are several important steps to take long before beginning the application process.

There are three key steps you should take as early as possible. Focusing on these areas will help strengthen your financial position and better prepare you for the mortgage application process when the time comes.

The first step any prospective homebuyer should take is to carefully review their credit profile. It is important not to assume you already know the condition of your credit or what information may appear on your credit report. Likewise, even if your credit history is less than ideal, there may still be opportunities to improve it before applying for a mortgage. Consumers are entitled to one free credit report each year, so it is wise to take advantage of that opportunity by obtaining your report and reviewing it thoroughly for accuracy and areas that may need attention.

• Start with the negative to get those issues resolved quickly.
• Look for any accounts listed as delinquent or any negative feedback such as late or missed payments.
• If there are any errors or discrepancies on your credit report, you can dispute them with the credit reporting agency to try to get them removed.

Once you feel you have addressed all immediate issues in your credit report (if any), you want to set a day each week where you take time to manage the resolution of any credit issues, since it may require follow up calls or additional outreach. You have to be persistent and continue until you feel each issue has been completely resolved.

The second step is to improve your debt-to-income ratio, which is a key factor lenders evaluate during the mortgage approval process. There are two primary ways to strengthen this ratio: increasing your income or reducing your existing debt. Increasing your income does not necessarily require changing careers or finding a new full-time position. In many cases, earning supplemental income through a part-time job, freelance work, or monetizing a particular skill or talent can help improve your overall financial profile and make you a more attractive candidate to lenders.

The third step is to begin saving for a down payment. While this can be challenging, any amount saved is better than not saving at all. Building a down payment fund can help reduce overall borrowing costs and provide greater peace of mind throughout the homebuying process, allowing you to focus more confidently on finding the right home and mortgage option.

Now that you have established a solid financial foundation and are working toward your goal of purchasing a home and applying for a mortgage, it is important to begin preparing the necessary documentation. What information will your lender require during the mortgage application process? While every borrower’s situation is different and certain requirements may vary, there are several standard documents and pieces of information you should have prepared in advance to help ensure the process goes as smoothly as possible.

You will be asked to provide proof of the following things:

Your Identity:

Your financial institution will require you to verify that you are, in fact, yourself, and that nobody is trying to apply for a loan under your name. You will be asked to provide a state issued photo identification, such as a driver's license or state photo identification card.

Your Income:

Your lender will typically require copies of your recent pay stubs to verify your current income and employment. In most cases, lenders request at least one month of pay stubs, though having the two most recent months readily available is recommended to help avoid delays during the application process.

In addition, lenders generally require at least two years of W-2 forms and any applicable 1099 forms to verify income history. If you are self-employed or earn commission-based income, you will most likely be asked to provide two years of complete tax returns as proof of income and financial stability.

Assets & Debts:

To show your assets and debt you’ll need to provide the most recent two to three months’ worth of the following:

• Statements for any checking, savings, 401K, IRA, stock, mutual funds, etc. A general rule of thumb is, if the account is listed on the application, be prepared to provide documentation for it.
• Documentation for any debt such as credit cards, student loans, etc.
• Judicial decree or court order for any obligations due to legal action.

Credit:

Your lender will obtain a copy of your credit report directly, so you will not need to provide one yourself. However, the lender must first receive your authorization to access your credit history. During this review, the lender will evaluate your overall credit profile and credit score, both of which can influence the interest rate you receive and the types of loan programs for which you may qualify.

It is important to remember that minor issues on a credit report do not automatically result in a denial. In some cases, lenders may request additional documentation or explanations to better understand your financial history. If your report includes late payments, collection accounts, or other derogatory marks, you may need to provide supporting information that demonstrates your current financial responsibility and ability to manage debt effectively.

If You’re Applying for a Construction Loan to Build a New Home:

If you’re applying for a construction loan to build a new home, you will be asked to provide a copy of the deed if you already own the land that you plan to build on, or a signed sales agreement to purchase the land. You should also have a copy of the final construction contract with plans and specifications for the home.

Additional Items You May Be Asked For:

Because lending requirements can vary from one financial institution to another, and every borrower’s financial situation is unique, you may be asked to provide additional documentation beyond the items listed above.

• If you are applying for your first mortgage, you may be asked for proof of your rental history showing stability and consistency in making payments. Canceled checks should be provided. You may also be asked to provide references, such as former or current landlords.
• If you’ve recently gone through a divorce or are in the process, you may need to provide the divorce decree for any questions on assets, alimony, child support, etc.
• For those that don’t have much of a credit history, you might want to have some additional documentation available that shows a 12-month history of making payments for things such as cell phone bills, utilities and cable. Anything you have that shows a history of making payments regularly and on time for at least a year will be helpful.

Are You Ready to Begin the Mortgage Application Process?

We have now covered many of the key steps and documents you will need to begin the mortgage application process. If you have taken the time to strengthen your financial foundation and gather the necessary documentation, the final step is simply to submit your application with confidence.

There is, however, one final consideration that should not be overlooked: choosing the right lender. Preparing your finances for a mortgage requires significant time, effort, and commitment, so it is important to work with a financial institution that will support your long-term goals. A mortgage is a long-term financial commitment, and your needs may evolve over the years.

The right lender will focus not only on helping you through the application process, but also on building a lasting relationship throughout the life of your loan. Whether you eventually decide to refinance, finance home improvements, explore a home equity loan, or address other financial needs, having a trusted banking partner can make a meaningful difference.

Citizens Savings Bank is a trusted community bank committed to helping individuals and families achieve their homeownership goals. As a locally rooted institution, we combine the resources and expertise of a full service lender with the care and attention of a community partner. Citizens Savings Bank is dedicated to guiding you through every step of the mortgage process with commitment to your success. Visit our mortgage center to explore what we have to offer. Subject to credit approval. Member FDIC. Equal Housing Lender. 

Learn More

Citizens Savings Bank has multiple locations throughout Lackawanna, Wayne, and Monroe Counties. For branch locations and hours, visit our website. We also have a Customer Support Team ready to answer any questions you may have. Call us today at 1-800-692-6279 or email [email protected]. Member FDIC. Equal Housing Lender.