How to apply for a mortgage in 3 steps (and tips to get approved)

Maggie Overholt
Maggie Overholt
The Mortgage Reports Editor
October 20, 2022 - 11 min read

Applying for a mortgage is simple

Applying for a mortgage is pretty straightforward. You’ll choose a lender, start the application (typically online), and provide supporting documents like tax returns and bank statements to verify your finances.

After that, it’s mostly a waiting game. The lender will check your credit and documentation, then decide whether to approve you. If everything checks out, you’ll set a date to close the loan — often within 30 days.

Many lenders now use online applications and some even offer same-day prequalification. So you can quickly estimate your interest rate and see how much home you can afford.


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How to apply for a mortgage in 3 steps

There are three basic steps to apply for a mortgage. You don’t need to memorize the process, since your lender will guide you through each stage. Still, it helps to know what’s coming so you can feel prepared.

1. Select a lender

The first step to applying for a mortgage is to decide which lender you’ll work with. Big banks, credit unions, online lenders, and mortgage brokers all offer home loans. Ideally, you want to compare offers from at least three lenders before deciding; this will help you find the lowest interest rate and can easily lead to thousands of dollars in savings.

To compare lenders, pick a few companies and get prequalified with each one. (For example, you might contact your current bank, an online lender, and a local credit union). Prequalification involves answering a few simple questions, after which the lender should give you an estimate of your rate, loan amount, and closing costs.

You’ll pick the offer that suits you best and then move on to a full application with that mortgage company.

2. Apply and submit financial documents

Once you’ve decided on a lender, you can complete a full mortgage application. You’ll provide financial documents to verify all the information you supplied during prequalification. This includes bank statements, pay stubs, W-2s (or 1099s if you’re self-employed), and investment account statements, among other things.

The lender will also pull your credit report and FICO score at this time to make sure you meet the minimum credit score requirements for your chosen mortgage program.

After checking your credit and documents, the lender can issue a preapproval letter, which is required to make an offer on a home. If the seller accepts your offer, you’ll sign a purchase agreement. Then you can submit the final sales price and property details to your lender.

This finalizes your loan application so that it can move on to the processing stage.

3. Respond to conditions and wait for approval

The rest of the mortgage application process is largely a waiting game. Your lender will take time to review your application and personal finances. It will also have the home appraised. This can take just a few days or as long as a few weeks.

Be sure to ask your lender about its typical closing times when you apply; this affects how long you need to lock your rate and the seller will want to know your closing date, too.

You should stay vigilant during the underwriting stage. Your lender might have follow-up questions or request additional documents to supplement your application. You want to respond to these requests as quickly as possible to make sure there aren’t any unnecessary delays to your closing.

When all conditions have been met and the loan is approved, you and your lender will schedule a closing day. That’s when you’ll sign your final loan papers and pay your down payment and closing costs. (Although, many buyers wire the cash a few days before closing so all their funds are ready to go on the big day.)


What happens after you apply for a mortgage?

Once you’ve completed a full mortgage application, it needs to go through the underwriting process. During this phase, your lender’s underwriting team will take a thorough look at all your financial documents and credit history to make sure you can afford your new home loan. They’ll also order a home appraisal to verify the property’s current market value.

Aver reviewing your loan packet, the underwriters will issue either a conditional approval — meaning additional documents or letters of explanation are needed to continue — or a final approval, meaning your loan is cleared to close.

Your lender will send you a Closing Disclosure three days before your closing date. It will detail items like the home purchase price, interest rate, mortgage payments, lender fees, and closing costs associated with your home loan.

Be sure to compare your Closing Disclosure with your Loan Estimate to see if any of the figures or terms have changed. If there are any changes, ask your loan officer to explain them to you.

How long does it take to get a mortgage?

Thanks to online forms and digital documentation, your initial mortgage application can be completed quickly. But the amount of time it takes to get approved and actually close the loan can vary a lot depending on the type of mortgage you use and your personal circumstances.

Most conventional loans can close within 30 days, provided the application is straightforward. But closing can take as long as 60 days or more in cases where the borrower has a complicated financial situation. An extremely busy lender or home appraiser can also delay the mortgage process.

Some types of mortgages take a little longer to close than others. For example, government-backed loans have additional stages in the approval process:

  • VA loans require a specialty VA home appraisal
  • Similarly, FHA loans have their own appraisal process
  • USDA loans require the Department of Agriculture to “sign off” on the loan application

Still, the extra steps needed for these loan programs shouldn’t cause too much delay during the home-buying process.

Tips to get approved for a mortgage loan

It’s important to set yourself up for success when applying for a mortgage. You want to present the strongest application possible in order to widen your loan options and lower your interest rate.

These five tips can help you get approved for a mortgage more easily and keep your home buying costs down:

  • Check your credit report: Review your credit history for errors and raise your score before applying if possible
  • Comparison shop for your loan: Get multiple rate quotes to find the lowest mortgage rate, fees, and closing costs
  • Get preapproved: Get a mortgage preapproval before you start seriously house hunting to make sure your price range is accurate
  • Avoid late rent payments prior to closing: Late payments can affect your credit score and mortgage eligibility
  • Avoid taking on new debt before closing: Even with preapproval, taking on new debt may affect your odds of closing or how much a lender will loan you
  • Keep credit card balances low: High balances can affect your DTI and credit score, which lender check again prior to closing

Here’s what you can do to make sure your mortgage application goes as smoothly as possible.

1. Check your credit before you apply for a mortgage

If you’re waiting until you apply for a mortgage to check your credit history, then you’re waiting too long. That’s because mortgage interest rates and mortgage qualification depend on your credit. And the stakes are pretty high.

If you check your credit when you apply and find out it’s lower than you thought, you’ll likely end up with a higher interest rate and more expensive monthly payment than you were hoping for. And if your credit score is too low (below 580) you might not qualify for a mortgage at all.

Higher credit means lower interest rates

Keep in mind, a higher credit score usually means a lower mortgage rate. So if you check your score and learn that it’s strong, you might still want to work on improving your credit score before you buy.

Consider that mortgage rates are based on credit “tiers,” and a higher credit tier means a cheaper mortgage. If your credit score is currently 719, for example, raising it by just one point could put you in a higher tier and earn you a lower interest rate.

Check your credit early

Ideally, you should start checking your credit early. It can easily take 12 months or more to reverse serious credit issues. So the sooner you get started, the better.

You’re legally entitled to free copies of your credit reports each year through annualcreditreport.com. These reports are vitally important because they’re what lenders use to calculate your score. Yet one study found that as many as one in five reports contain errors that are serious enough to affect a consumer’s creditworthiness.

So you need to crawl yours, making sure they’re 100% accurate. The Consumer Financial Protection Bureau has useful advice for disputing errors in your credit history.

Raise your credit score before you apply if possible

If your credit reports are accurate but your score is lower than it could be, take steps to improve it. There are three things you can do immediately to become a better-qualified borrower:

  1. Keep paying every single bill on time
  2. Reduce your credit card balances: If they’re above 30% of your credit limits, you’re actively hurting your score. The lower the better
  3. Don’t open or close credit accounts: Wait until after closing

Those three action points should help your score over time. You can also read our guide to improving your credit score.

2. Compare mortgage rates with multiple lenders

It can be a big mistake to accept the first mortgage quote you get.

Many first-time home buyers don’t know it, but mortgage rates aren’t set in stone. Lenders actually have a lot of flexibility with the interest rate and fees they offer. That means a lender you’re looking at might be able to offer a lower rate than the one it’s showing you.

Shopping leads to savings

In order to get those lower rates, you have to shop around and get a few different quotes. If you get a lower rate quote from one lender, you can use it as a bargaining chip to talk other lenders down.

Shopping around for mortgage rates also lets you know whether you’re getting a good deal. For example, a 7.5% rate and $3,000 in fees might sound all right if it’s the first quote you’ve gotten. But another lender might be able to offer you 7.0% and $2,500 in fees. That makes the first offer a lot less appealing — but you won’t know it until you look around.

Get at least three mortgage quotes

Compare personalized rate quotes from at least three to five lenders to make sure you’re getting the best deal. Read the quotes carefully because things like discount points can make an offer look more appealing than it really is. Different down payment amounts, loan terms, loan amounts, and mortgage loan types will skew loan estimates, too.

When you request multiple quotes within the same 14-day period, your credit score shouldn’t be negatively impacted.

Additionally, a mortgage broker could help you compare multiple quotes at once.

3. Get preapproved before house hunting

A mortgage preapproval will give you a valid estimate of how much a lender is willing to loan you. Many first-time home buyers make the mistake of applying for a mortgage too late, and not getting preapproved before they begin house hunting.

How late is too late to start the preapproval process? If you’re already seriously looking at homes, you’ve waited too long.

You really don’t know what you can afford until you’ve been officially preapproved by a mortgage lender. They’ll determine your exact home buying budget by looking at your full financial portfolio, including bank statements, tax returns, pay stubs, credit reports, and 1099 forms or profit and loss statements if you’re a self employed borrower.

Even if you think you know what you can afford, you might be surprised. Existing debts can reduce your home buying power by a startling amount. You also can’t be sure how things like credit will affect your budget until a lender tells you.

By not getting preapproved for a mortgage before you start shopping, you run the risk of falling in love with a house only to find out you can’t afford it. Plus, most sellers and sellers’ agents won’t consider an offer from a buyer who’ hasn’t been approved by a mortgage lender.

4. Don’t be late on rent payments

Being late on rent is a bigger deal than you might think — and not just because it’ll land you with a late fee from your landlord. Late rent payments can actually bar you from getting a mortgage.

Your rent history is the biggest indicator of whether you’ll make mortgage payments on time. Late or missed rent checks can prevent you from buying a home.

It makes sense when you think about it. Rent is a large sum of money you pay each month for housing. So is a mortgage loan. If you have a spotty history with rent checks, why should a lender believe you’ll make your mortgage payments on time?

When you apply for a mortgage, the lender will check your rent history over the past year or two. If you’ve been late on payments, or worse, missed them, there’s a chance you’ll be written off as a risky investment. After all, foreclosure is an expensive hassle for lenders as well as for homeowners.

Rent is especially important for people without an extensive credit history. If you haven’t been responsible for things like credit cards, loans, or car payments, rent will be the biggest indicator of your creditworthiness.

5. Don’t take on any new debts

You may have heard that you shouldn’t finance an expensive item while applying for a mortgage. But most people don’t know it’s a mistake to buy something with big payments even years before applying for a new loan.

That’s because mortgage underwriters look at your “debt-to-income ratio” (DTI ). This is the amount you pay in monthly debts compared to your total income. The more you owe each month for things like car payments and personal loans, the less you have left over each month for mortgage payments. This can seriously limit how much home you can afford.

For example, take a scenario with two different buyers — they earn equal income, but one has a large car payment and the other doesn’t.

Buyer 1Buyer 2
Income$75,000$75,000
Existing Debt$100/month$100/month
Car Payment$500/month$0
Qualified Mortgage Amount*$300,000$390,000

*Scenario for example purposes only. You own mortgage amount will be different.

In this scenario, both buyers qualify for a 36% debt-to-income ratio. But for Buyer 1, much of that monthly allowance is taken up by a $500 monthly car payment. As a result, Buyer 1 has less wiggle room for a mortgage payment and ends up qualifying for a home loan worth almost $100,000 less.

That’s a big deal: $100,000 can be the difference between buying a house you really want (something nice, updated, in a great location) and having to settle for a just-okay house — maybe one that needs some work or isn’t in the location you wanted.

6. Keep credit card balances low

If you’ve already taken out a big loan, there’s not a lot you can do about it now. But you can still look out for shorter-term credit purchases. Try to avoid financing or refinancing anything before closing, if you can.

Of course, it’s tempting. You’re going to need a ton of stuff for your new home — and you might want to start stocking up on furniture, decorations, and so on. But loan officers nowadays routinely pull your credit score in the days leading up to closing. Any new account you open or any significant purchase you make on your plastic could drag that score down enough to re-open your mortgage offer.

This may only increase your mortgage rate a little. But in extreme circumstances, it could see your whole approval pulled and your journey to homeownership stalled. So avoid making those purchases until after you close. If it helps, imagine the shopping spree you can go on the moment you become a homeowner.

Get started on your mortgage application

If you plan to buy a house any time soon, now is the time to start thinking about your mortgage application.

Take a look at your credit, get your debts in check, and start shopping around for rates. Additionally, experiment with a mortgage calculator to get an idea of how down payment, interest rates, and credit score will affect your monthly payment. Try to see your financial life the way a lender will before starting your loan application.

Remember, the most important thing you can do before house hunting is to get preapproved and determine your budget at today’s rates.