Finding the right home takes time, effort, and a bit of luck. If you’ve managed to find a property that’s right for you and your budget, then it’s time to get one step closer to homeownership by applying for a mortgage loan. And though this is one of the biggest financial decisions you can make, knowing how to start and what you need will put you one step ahead of other potential homebuyers.

KEY TAKEAWAYS

Mortgage lenders consider factors like monthly income, available assets, and credit score during the application process.
Lenders generally seek to loan to low-risk borrowers, so be ready to provide substantial proof of your finances.
Loans aren’t finalized until a bid is accepted by the seller.
Mortgages come in a variety of term lengths and types. Be sure to choose one that fits your plans as a homeowner.

What to Do Before Applying

The first step in applying for a mortgage isn’t necessarily filling in the paperwork. There’s a lot of preparation involved before you reach that point. The more you prepare, the better off you’ll be as you hit each milestone in the application process while trying to close on a house.

Whether you’re becoming a new homeowner or are looking to change homes, the following items are just some things you’ll want to address before kicking things off.

Consider your credit score

Lenders will want to know your credit score. As you gear up to start your mortgage application process, check your credit rating and make sure it’s in good shape. Though each lender will typically have a minimum credit score in mind for prospective mortgage applicants, Experian estimates that the minimum FICO score needed to secure a conventional mortgage is in the 620 range.1

Do your research

Early on in the mortgage application process, you want to make sure the lender you ultimately pick is right for you. A mortgage can last as long as 30 years, so the relationship is important. Do your due diligence and choose a lender that can best fit your needs.

Decide on a mortgage type

There’s no one-size-fits-all mortgage solution for today’s homebuyer. Lenders offer several types of mortgages in a bid to meet the needs of a diverse clientele. So when deciding on a lender and a mortgage type, you’ll encounter information about 15-year and 30-year mortgages, adjustable-rate mortgages, and even mortgages backed by the U.S. government if you qualify.2 The important thing is to seek out the best mortgage type to match your situation.

Gather your documents

The loan application process is just that—a process. You’ll need to hand over documents that establish your creditworthiness and convince a lender why they should trust you to pay back potentially hundreds of thousands of dollars. This paperwork will prove you have a steady income, list your assets, and lay out your financial obligations and debts. Have these documents ready before getting started.

Seek pre-approval from different lenders

“Congratulations, you’ve been pre-approved for…” We’ve all received those letters in the mail for loans and credit cards, and they aren’t the same as a mortgage pre-approval. That’s something for which you must apply. Pre-approval will give you an idea of how much you can borrow and what kind of mortgage you’ll have. Do this before making an offer on a home because it lets the seller know you have the bank’s backing.

How the Application Process Works

When you’ve laid the groundwork for your mortgage application, you can begin the process in earnest. Remember that by entering the housing market, you may be competing against other buyers for the same property while at the same time negotiating your best price with the seller. In a seller’s market, that often means higher price tags and concessions, while a buyer’s market will usually result in lower costs and greater negotiation power for the new homeowner.

With the current housing market in mind and your preparations complete, use the following steps to secure a mortgage and land your next home.

Make an offer. If you’ve found the house of your dreams and the seller has accepted your offer, then you’re ready to start the application process. This means you’ve likely bested other prospective homeowners with your offer and now all you need to do is secure the funds before the closing date.
Choose a lender and submit an application. Because you’ve already gone ahead and researched various lenders, you should have a good idea of where you intend to get your mortgage—or at least have the list whittled down to a select few. Take this time to finish shopping around for the best interest rates you can find, the lowest fees charged, and the most beneficial loan term. Get quotes from different lenders.
Review loan offers and choose from among them. Loan estimates will include interest rates, costs, fees, and loan period among other details.3 Pick a lender you feel you can trust.
Wait for the loan to be processed and cleared. This step takes time, so be patient and ready to respond to questions or requests for extra documentation from the lender. By providing fast responses, you’ll speed up the process.
Close on the mortgage. After all of the painstaking effort, the time to close has come. To wrap up, you review your closing statement and sign some final paperwork. The loan is now yours to pay back, along with the keys to your new abode.

What Documentation Do You Need?

Throughout the entire application process, you’re proving your creditworthiness to lenders by providing official statements that outline your financial status, along with other legal and certifiable documentation.

You’ll need to verify your annual income, which means supplying tax returns, recent pay stubs, or other proof of income. Lenders might also request the following: bank statements, credit history, rental history, and assets and debts. Additional documents you should have on hand include a signed copy of the sale agreement between you and the seller, identification, and, if necessary, documents that explain credit blemishes like late payments and run-ins with collections.4

How Long Does the Entire Process Take?

How long your mortgage loan application will take hinges on a number of factors. As of May 2023, the average mortgage took approximately 45 days from application to closing, according to ICE Mortgage Technology.5

The most important thing to remember is you should always be ready to address any questions or provide any supporting documents the lender may request. By staying on top of the process, you can help keep things moving.

What Are the Key Documents You Need to Gather for a Mortgage Application?

How Important Is a Credit Score to Securing a Mortgage?

Your credit score is as critically important as any other information you supply, so be sure to check it. Lenders generally have a minimum credit score in mind for prospective mortgage applicants. The minimum FICO score needed to qualify for a conventional mortgage is around 620.1

How Long Does Closing a Mortgage Typically Take?

It depends. The average mortgage takes about 45 days, according to the ICE Mortgage Technology research.5

The Bottom Line

Buying a home, a major milestone in people’s lives, requires that you pay attention to the details surrounding your mortgage loan. By doing your homework and following through to the closing date, you can ensure that you end up in the house you want at a rate that you can afford.

How to Apply for a Mortgage Loan