Needful Things

Written by Posted On Wednesday, 28 September 2022 00:00

In the days before the advent of automated underwriting, those applying for a home loan were asked for a complete set of documents. These documents were used by the underwriter to verify the information that appeared on the loan application, just in case they were needed. And the list could be quite lengthy. Today, however. Automated underwriting essentially reverses the process. Instead of asking for everything up front just in case it was needed, underwriters only ask for the items listed on the "needs list." 

This new list was prepared after review of not only the application but also the credit report. For your situation, here are some things you may begin to gather if you're getting ready to apply for a home loan.

Paycheck Stubs and W2 Forms

When someone lists on the loan application an amount for gross monthly income, underwriters will ask to review the most recent paycheck stubs and last two years of W2 forms. The paycheck stubs should show gross monthly income and deductions including property taxes and insurance. The stubs should be computer generated and not handwritten.

Bank Statements

Be prepared to provide the most recent set of bank statements from the account(s) being used for the down payment, associated closing costs and prepaid items. Prepaid items are those reserved for upfront property taxes and the first annual homeowners insurance policy. Lenders typically want to see at least two or three months of these reserves still remaining in the account after all the financial dust settles.


Your lender will contact your insurance company to verify sufficient coverage to repair or replace the property in the event of damage.


It used to be that lenders used the credit report to add up all the minimum monthly required charges for all credit accounts. Today, it's mostly the credit scores that are scrutinized. Most loan programs do require a minimum score.

For the Self-Employed

If you're self-employed or receive other types of income, be prepared to provide the last two years of federal income tax returns along with any 1099s that report income outside of an employer. 

And finally, the lender will likely ask for a year-to-date profit and loss statement. This P&L will show gross income for the year along with business expenses deducted. The lender will then use the net monthly income and not the gross monthly amount.

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David Reed

David Reed (Austin, TX) is the author of Mortgages 101, Mortgage Confidential, Your Successful Career as a Mortgage Broker , The Real Estate Investor's Guide to Financing, Your Guide to VA Loans and Decoding the New Mortgage Market. As a Senior Loan Officer and Mortgage Executive he closed more than 2,000 mortgage loans over the course of more than 20 years in commercial and residential mortgage lending. 

He has appeared on CNN, CNBC, Fox Business, Fox and Friends and the Today In New York show. His advice has appeared in the New York Times, Parade Magazine, Washington Post and Kiplinger's as well as in newspapers and magazines throughout the country. 

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