California Mortgage Loan Documents: An A-to-Z List

When you apply for a mortgage loan in California, you’ll be asked for a variety of documents relating to your income, assets and debts. Lenders use these documents to verify your financial situation and to underwrite the loan.

The exact list of documents needed for a mortgage loan in California can vary from one lender to the next. Below, we have provided a list of the most commonly requested items used for mortgage underwriting and approval.

Part 1: Common Loan Documents in California

This list is not exhaustive. But it does give you a pretty good idea as to which documents you’ll need to round up when applying for a home loan in California.

1. A list of assets

When applying for a mortgage loan, you might have to submit a list of other assets including mutual funds, IRA / 401k, real estate holdings, and other investments. Lenders use this information to evaluate your overall financial stability and ability to repay the loan.

2. Bank statements

Your lender will also want to know how much money you have in the bank, and how long it has been there. The purpose is to ensure that you have the funds needed to cover your closing costs and down payments. In California, it’s customary for borrowers to provide two to three months worth of bank statements, but this can vary.

3. Credit reports

Mortgage companies typically request credit reports and scores from the three major credit-reporting bureaus, Equifax, Experian, and TransUnion. They will obtain your credit score as well. This information shows how you have borrowed and repaid money in the past. It also helps the lender verify outstanding loans and other debts.

4. Debt-related information

Lenders want to ensure that you’re not taking on too much debt, with the addition of a home loan. One of the ways they do this is by analyzing your recurring debts in relation to your income. So you may have to provide a list of your current debts, such as credit cards, personal or student loans, car loan, etc.

5. Gift letters

If you receive money from a friend, family member, employer or other approved donor to help cover your down payment, you’ll need to obtain a gift letter from the donor. This is another standard mortgage document in California, when applicable. Learn more about gift money.

6. Pay stubs

These are used to verify your employment status as well as your current earnings. Typically, the two most recent pay stubs are requested, or enough to cover a 30-day period. But this too can vary from one lender to the next (a recurring theme in this guide).

7. Purchase agreement

Once you’ve signed a purchase agreement / contract with the seller, you’ll need to provide a copy of the document to your lender. You won’t have this mortgage document when you get pre-approved for a loan. But you’ll need to submit it before the loan can actually close.

8. Residences

Lenders often request to see a list of residential addresses for the last two years or more. This is used to verify the borrower’s credit and financial history, including any past mortgage loans.

9. Self-employment documents

In California, home buyers who are self-employed may have to provide additional documents for mortgage underwriting and approval. For example, a profit-and-loss (P&L) statement and business tax returns might be requested.

10. Tax returns

Lenders typically want to see tax returns for the last couple of years. They use them to verify income level and stability, which is an important part of the mortgage underwriting and approval process.

11. W-2 statements

When applying for a home loan in the state of California, you can expect to provide W-2 statements for the last two years. As with tax returns, these documents are primarily used for income verification purposes.

Part 2: Frequently Asked Questions From Buyers

Over the years, we’ve learned that home buyers in California tend to have a lot of questions about the documents they have to provide. Below, we’ve addressed some of the most common questions:

1. Why do mortgage lenders need so many documents?

Banks and mortgage companies require a variety of documents to verify your financial situation and determine your ability to repay the loan. These documents provide proof of income, assets, and debts, helping lenders assess the level of risk involved in lending to you.

This process also helps lenders comply with requirements from third-party organizations, such as the FHA, Freddie Mac, VA, etc.

2. Why do they require several months of bank statements?

Lenders request several months of bank statements to verify your financial stability and ensure that the funds in your account have not been recently borrowed. This helps confirm you have the necessary resources for the down payment, closing costs, and reserves.

3. Do I need to provide documentation for all my debts?

Yes, lenders need a clear picture of your financial obligations to calculate your debt-to-income (DTI) ratio. This includes credit card balances, car loans, personal loans, student loans, and other recurring debts.

4. What is a gift letter, and when is it required?

A gift letter is a document provided by someone who gives you money to help with your down payment or closing costs. It states that the money is a gift and not a loan that needs to be repaid. Gift letters are required whenever a borrower gets down payment help from a third party, such as a family member.

5. Why do lenders need tax returns?

Tax returns provide a comprehensive look at your income over the past couple of years. It helps lenders determine the stability and consistency of your income. This is important for all borrowers but especially those who are self-employed or have non-traditional income.

6. What if there’s a discrepancy in my paperwork?

If your documents contain discrepancies, such as differences between stated income and tax returns, your lender will likely ask for clarification. Be prepared to provide additional documentation or explanations to resolve any inconsistencies.

7. Can I submit documents electronically?

Yes, most lenders allow you to submit documents electronically and some even prefer it. Electronic submissions can speed up the process and make it easier to track and manage your paperwork. Be sure to use secure methods, such as encrypted email or your lender’s secure online portal, to protect sensitive information.

8. How long does it take to review and process them?

The time it takes to process mortgage loan documents can vary depending on several factors, including the complexity of your financial situation and the lender’s workload. In California, the mortgage underwriting and document review process can take anywhere from several days to a couple of weeks.

9. What if my financial situation changes after I apply?

If your financial situation changes significantly after you’ve applied for the loan, inform your lender immediately. They may need to re-evaluate your application and request updated documents that reflect your current situation.

10. Do self-employed borrowers have to provide extra documents?

Yes, mortgage lenders in California often require additional documentation from self-employed borrowers. This can include both personal and business tax returns, profit and loss statements, and more.