How To Apply for a Mortgage

Know what to expect when you apply for a mortgage

Real estate agent greeting couple at house
Photo:

Noel Hendrickson / Getty Images

If you're like most of us, chances are you don't have enough cash to buy a house outright so you'll need to take out a mortgage to make your homeownership dreams a reality. After you've figured out if you're ready to buy a home, the next step is to fill out a mortgage application. 

Few things conjure fear into the heart of would-be homeowners like the words "mortgage application." While the process is extensive (you're not just borrowing money to buy a weedwacker, after all), rest assured—there are lots of things you can do to smooth out the process. 

Key Takeaways

  • Applying for a mortgage is a long process; it's not as simple as filling out one form. 
  • Check your credit report and put together a folder of documents before you apply for a mortgage.
  • Most experts recommend getting preapproved for a mortgage before you go house shopping.

Preparing for a Mortgage Application

Getting a mortgage can be a long process. One of the best things you can do to make it as painless as possible is to get everything ready in advance. Here's how you can prepare for the mortgage application process.

Avoid Applying for New Credit

Once you start contacting lenders, it's a good idea to avoid applying for any new credit. Doing so can throw a wrench in the mortgage application process. Your lender may require you to write a letter outlining why you applied for the new credit, for example, and that can hold up the mortgage application process. 

Determine the Right Mortgage

Not all mortgages are created equal. There are actually several different kinds of mortgages to choose from—a fixed rate vs. an adjustable rate; a traditional loan vs. a FHA loan; etc. Even within the same mortgage type, you'll have to make decisions:

A good financial advisor or mortgage advisor can help you answer these questions. 

Check Your Credit Report

Next, check your credit report with each of the three credit bureaus to make sure it's accurate. If you find any errors, make sure to fix them before filing your mortgage application so that you're not being unfairly penalized.  

Note

You can get one free credit report per week from Equifax, TransUnion, and Experian through December 2023 at AnnualCreditReport.com.

Gather Your Documents

Lenders will ask for a lot of your financial documents. Putting together a pre-made packet or digital folder with the most commonly requested documents now can speed up the mortgage application process significantly. Here's what to include in it:

  • Pay stubs for the past 30 days
  • Tax returns for the two most recent years
  • Two most recent bank account statements
  • Copy of your driver's license, front and back
  • Documents showing any recent name change
  • Documents for any other income sources (alimony, child support, etc.)
  • Statements for any other down payment savings, such as investment accounts

Get Preapproved

Find some good mortgage lenders to reach out to for a preapproval. Getting preapproved means your lender has already gone through some preliminary checks and agreed that you're likely to qualify for a mortgage up to a certain amount. There are a few good reasons to do this:

  • It speeds up the mortgage application later when you do find a home.
  • It keeps you from shopping for homes that are outside of your budget.
  • It makes your offer stronger and reassures sellers, especially in a competitive market.

Find a House

Now comes the fun (or frustrating) part: finding the home you want to buy. Choose a good buyer's agent to help you, especially if you live in a competitive market. A skilled real estate professional will help you get the home you want, within your means. If your offer is accepted, it's time to complete your mortgage application. 

Note

Interview a few real estate agents before deciding which is right for you and your homebuying mission. You’ll want to choose one who has experience in your preferred neighborhoods, price range, and the type of home you’re seeking.

How To Apply for a Mortgage

Now that you're prepared, once you find the house you want to buy, things should go pretty smoothly from here if you take it step by step:

Get a Loan Estimate

Contact each of the lenders with whom you've been preapproved. Let them know the address of the place you're buying, the contracted sales price, and your current down payment savings. Each lender should provide you with a standardized form called a loan estimate that details all of your costs for the mortgage. 

From these documents, you can negotiate and choose the best lender/loan option for you. Contact the lender to let them know you'll be proceeding with the mortgage application. 

Purchase Required Insurance

Most lenders require you to purchase homeowners insurance and title insurance. Shop around for these products now and get quotes. Choose the best policy option for you and share the details with your lender so they can verify it meets their requirements and get it set up for payments in your escrow account

Depending on where you live, you may want to purchase additional insurance, such as flood insurance or an earthquake rider policy. 

Complete a Home Inspection

Schedule a home inspection as soon as possible. That way you can quickly identify any problems and negotiate the solutions with the home sellers if need be. 

Note

You can request that your purchase contract be contingent on a satisfactory inspection. That will give you the right to cancel the sale without penalty if you are not satisfied with the results.

Keep in Touch With Your Lender

Your lender will schedule a home appraisal and complete additional due diligence checks during this time frame. Your lender may update your Loan Estimate now, depending on what they find. It's important to stay in close contact with your lender during this stage of the mortgage application process, so you're aware of what's going on and whether anything further requires your attention. 

Note

Among the most common reasons for an updated loan estimate: the home was appraised for less than what you’ve offered; there is an issue documenting your overtime, bonus, or additional income; you made a change to your loan type or adjusted your down payment amount; or you requested a rate lock after your lender issued its original loan estimate.

What To Do After Your Mortgage Application Is Approved

Once your mortgage application is approved, it's time to sign on the dotted line to make things official. You'll typically do this at the same time that you complete the rest of your loan closing when the title transfer takes place and you get the keys to your new place. 

You'll also pay a certain amount into your escrow fund to kickstart its balance if your lender requires it. Your lender uses this account to pay your homeowners insurance and property taxes for you, so having money already in there helps when the payments come due. You'll be responsible for maintenance and repairs, so it's a good idea to start a fund for these expenses now. 

Your lender will tell you when you'll need to start making your mortgage payments. It's highly recommended to set these up on autopay so you don't forget. Last but not least—enjoy your new home!

Frequently Asked Questions (FAQs)

How long does it take to get a mortgage application approved?

While it could take as little as 10 to 15 minutes to get preapproved for a mortgage, most preapproval letters are sent out within 10 days The actual mortgage closing process takes about 49 days on average as of December 2021.

How much does applying for a mortgage affect your credit score?

Applying for a mortgage generally only lowers your score by around five points or less and the effect is only temporary, lasting around a year. If you complete all of your rate shopping within 14 days, it will be recorded as a single inquiry on your credit report, limiting the hit to your credit score.

How much is a mortgage application fee?

Some lenders may charge a credit report fee, typically less than $30, to check your credit during the application process. But they're not allowed to charge you any fees until they've shown you a loan estimate, and you’ve decided to proceed with the application.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. PR Newswire. "Equifax, Experian and TransUnion Extend Free Weekly Credit Reports in the U.S. Through 2023."

  2. Consumer Financial Protection Bureau. “Create a Loan Application Packet.”

  3. Consumer Financial Protection Bureau. “Look Out For Revised Loan Estimates.”

  4. Bank of America. “​​Two Smart Homebuying Moves: Mortgage Prequalification and Preapproval.”

  5. ICE Mortgage Technology. “​​Origination Insight Report: December 2021.”

  6. FICO. “Credit Checks: What Are Credit Inquiries and How Do They Affect Your FICO Score?”

  7. Consumer Financial Protection Bureau. “How Much Does It Cost to Receive a Loan Estimate?”

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