Getting a mortgage asks a lot of you upfront. You’re pulling together documents, responding to lender requests and making sense of terms like ‘underwriting’ all while trying to find a home. There are more steps than most buyers anticipate, and the wrong move at the wrong time can set back your closing or cost you the loan.
The good news is that the application process follows a predictable path. Here’s what to expect at every stage, from financial prep to closing day.
Step-by-step: How to apply for a mortgage
Below, industry experts walk through nine steps to apply for a home loan:
1. Check your credit and financial health
Head to AnnualCreditReport.com and pull your free reports before you do anything else. Look for errors, late payments and high balances; all three can drag down your score and limit which loan types you qualify
for. Dispute anything inaccurate before you apply.
You’ll also want to understand your debt-to-income (DTI) ratio, which tracks how much of your monthly income goes toward paying off debt.
Lenders look at two versions:
- Front-end DTI: Housing costs only (mortgage, taxes, insurance)
- Back-end DTI: Housing plus all other monthly debts like car payments, student loans and credit cards
Credit score minimums vary by loan type. But “the lower the score, the higher the down payment might be required,” says Dean Rathbun, the senior vice president of lending at United American Mortgage Corporation, a residential mortgage lender headquartered in Costa Mesa, California.
2. Determine your budget
To estimate how much house you can afford, Benjamin Schieken, a mortgage professional and founder of Fincast, a Miami, Florida-based mortgage rate shopping tool, recommends starting with the 28/36 rule. “Housing costs should stay around 28% of gross monthly income and total debts around 36%,” he says.
“Principal, interest, taxes and homeowners insurance (PITI) are the main monthly obligations,” explains Jeff Taylor, a Mortgage Bankers Association (MBA) board member and managing director at Mphasis Digital Risk, a Maitland, Florida-based technology services provider to the mortgage industry. “But there’s mortgage insurance if your down payment is less than 20%.”
Also factor in Homeowners Association (HOA) dues, maintenance and any location-specific coverage, such as flood or fire insurance. These costs can increase over time, so build in a cushion when setting your ceiling.
3. Get preapproved
The difference between mortgage preapproval vs. prequalification often trips up prospective homebuyers.
Prequalification is a surface-level estimate based on information you provide; preapproval goes further. The mortgage lender verifies your income, assets, credit and debts and issues a formal letter confirming what you qualify for. In competitive markets, “sellers respond better to strong pre-approval letters than verbal pre-qualification,” says Taylor.
Keep in mind every lender’s preapproval process is slightly different, so ask upfront what their review entails.
Tip: Preapproval credit reports typically expire within 60 to 90 days, so time your application accordingly if your home search runs long.
4. Compare lenders and loan options
Lenders offer different rates, fees or loan products, which is why shopping around matters. Start by understanding which loan type fits your situation. The most common is a conventional loan. It’s not government-backed, requiring a 620+ credit score and as little as 3% down.
In addition, there are three government-backed alternatives, according to Christopher Armantrout, a mortgage broker and owner of Springfield, Tennessee-based residential lender Valor Mortgage:
- FHA (Federal Housing Administration): Government-backed; 3.5% down minimum with more flexible credit standards
- VA (U.S. Department of Veterans Affairs): For eligible military members and veterans; 100% financing, no income or location restrictions
- USDA (U.S. Department of Agriculture): 100% financing for rural buyers; has income and location limits
Down payment assistance programs are also worth researching. Many states offer them, and oftentimes you can stack them with government-backed loans.
When comparing lender offers, the interest rate is only part of the picture. The APR, or annual percentage rate, wraps in fees and points to show what borrowing actually costs.
Part of comparing lenders is knowing which term you’re shopping for. A shorter term, like 15 years, means you own the home outright sooner and spend less on interest — but the monthly payment is steeper. Stretching to 30 years makes the payment more manageable but extends how long you’re paying interest.
Tip: Request Loan Estimates from multiple lenders and compare them side by side. Small differences in rate and fees can snowball into tens of thousands of dollars across the life of the loan.
5. Gather documents needed for a mortgage application
Have at least two years of W-2 tax returns and employment history, two months of bank statements, your two most recent pay stubs and a government-issued ID ready, Taylor notes. And if you have unique circumstances like gift funds, divorce or large deposits, Schieken advises having documentation ready for those too.
6. Submit your mortgage application
When you submit your application, you’re giving the lender a complete picture of your income, assets, debts and property details. Expect a hard credit check, which may temporarily nudge your score down by a few points. If you’re rate shopping with multiple lenders, credit bureaus treat multiple mortgage inquiries within a 45-day window as a single inquiry.
Within three business days, the lender is required by law to send you a Loan Estimate outlining your interest rate, monthly mortgage payment and estimated closing costs. Review it carefully, then sign an “intent to proceed” to move forward.
7. Go through underwriting
The lender’s underwriter reviews your full financial file in detail.
Rathbun describes it as an evaluation of the “three C’s”:
1. Character (credit history)
2. Capacity (ability to repay)
3. Capital (down payment and assets)
Don’t be alarmed if the underwriter comes back with questions. A letter explaining an unusual bank deposit, an employment gap or an income change is par for the course. Work through any requests promptly and you’ll reach conditional approval. This means the lender expects to approve your loan after resolving a few outstanding items before closing.
8. Home appraisal and inspection
These two steps often happen around the same time but serve different purposes.
“An appraisal is about value,” explains Schieken. “An inspection is about condition.” Lenders order an appraisal to ensure the home is worth what you’re borrowing. An inspection, while not required for the loan, examines the roof, foundation, plumbing and electrical systems and can reveal costly repairs that affect your decision to buy.
9. Final approval and closing
“Clear to close” means the underwriter has signed off on everything and approved your loan. At least three business days before closing, the lender must send you a Closing Disclosure outlining your final loan terms, interest rate, monthly payment and closing costs. Review it against your original Loan Estimate before signing anything.
Closing day is mostly a signing marathon. A closing agent will walk you through the final documents, including the promissory note — your formal repayment agreement — and the deed of trust, which links the property to the loan until it’s paid off. Have your closing costs and down payment ready to wire in advance. The home officially becomes yours once the county records the deed.
How long does it take to get a mortgage?
Most purchase loans close in about 30 days once you’re under contract. Simpler files, like a W-2 borrower with straightforward income, can close in as little as 11 to 20 days, according to Rathbun. Self-employed borrowers or those with complex finances can take longer.
Common delays include appraisal holdups, missing documentation and employment changes. “The fastest files are the ones where the borrower is organized, responsive and honest upfront about anything that could affect the loan,” Schieken says.
What documents do you need to apply for a mortgage?
Here’s a complete checklist of home loan documents to help you get organized before you apply:
Proof of identity
- Government-issued photo ID (driver’s license, passport or state ID)
- Social Security card or Individual Taxpayer Identification Number (ITIN)
Proof of income and employment
- Two most recent pay stubs
- W-2 from the past two years
- Federal tax returns from the past two years
- Business tax returns and a year-to-date profit and loss (P&L) statement if self-employed
- Benefit award letters, divorce decrees or lease agreements for alternative income sources if applicable
Proof of assets
- Two months of bank statements
- Retirement or investment account statements
- Gift letter if receiving down payment funds from a family member
Common mistakes to avoid
A few missteps can slow things down or derail your approval, experts say:
- Switching jobs forces the lender to requalify your income and can require 30 days of new pay stubs, Rathbun notes.
- Taking on new debt, like financing a car, furniture or appliances, can shift your DTI at the wrong time.
- Missing documentation can push back your closing date or cost you your rate lock.
- Not shopping lenders can cost you. “The difference between offers can be tens of thousands of dollars over the life of the loan,” Schieken warns.
Tips to improve your chances of approval
Unsure if you’d qualify? Taking these steps before you apply can improve your odds:
- Boost your credit score. Aim to keep what you owe on each card well under 30% of its limit, and hold off on new credit applications until after you close.
- Reduce debt. Knocking out smaller balances first is one of the quickest ways to reduce your monthly obligations and lower your DTI.
- Increase your down payment. The more you put in upfront, the less you borrow. And once you hit 20% on a conventional loan, you can skip private mortgage insurance (PMI) altogether.
- Maintain stable income. Lenders want to see at least two years of steady employment. Avoid changing jobs or sources of income before or during the application process.
How to choose the right mortgage lender
Step four above covered comparing rates and APR, but fees deserve equal attention. Rathbun recommends zeroing in on Box A of the Loan Estimate (the section dedicated to lender fees), which breaks down discount points, underwriting and processing costs. You can choose a slightly higher rate with lower upfront fees, or pay points at closing to buy down the rate.
Tip: Before committing to a lender, ask how quickly they close and how reachable their team is once underwriting begins. “The cheapest-looking rate isn’t always the best deal,” Schieken emphasizes.
How to apply for a mortgage FAQs
What credit score do you need to apply for a mortgage?
The credit score you need for a conventional mortgage is at least 620. With an FHA loan, a 580 score qualifies with 3.5% down, or a 500 score with 10% down.
How much money do you need for a down payment?
It depends. Conventional loans start at 3%, FHA loans require 3.5% and VA and USDA loans offer 0% down for qualifying borrowers.
Can you apply for a mortgage online?
Yes. Most lenders let you submit documents, compare rates and receive a preapproval letter through a digital portal.
What is the difference between preapproval and final approval?
Preapproval gives you a sense of what you might qualify for based on an initial review of your finances. Getting to final approval means an underwriter has gone through every document and formally approved you for a specific loan on a specific property.
Can I apply for a mortgage with bad credit?
Yes. With FHA, a 580 score can still get you in the door — and VA and USDA programs are generally more forgiving on credit for eligible buyers.
This article originally appeared on USA TODAY: How to apply for a mortgage: A step-by-step guide for homebuyers
