How to Apply for a Mortgage (And How Long the Process Takes), Step By Step

Mortgage rates surged to the highest levels since the Great Recession — adding financial pressure on homebuyers navigating today’s seller’s market.

Buying a home can be a nerve-wracking process — and it’s especially true today. But if you’re preparing to apply for a mortgage, don’t fret. With enough preparation, it’s still possible to buy a home that fits your budget and meets your needs.

This guide to the mortgage application process will help you get ready for this important purchase and the challenges you can expect in the current housing market.

Before You Begin: Basic Documentation Required for a Mortgage

The mortgage application process involves a lot of paperwork, so it’s best to gather as much as you can before you begin house hunting. While the exact documents you’ll need may vary, here’s what you can expect the lender will ask:

  • ID (passport, permanent resident card, or driver’s license)
  • Social Security number
  • Pay stubs from the last 30 days
  • Bank statements from the last 60 days
  • W-2s or I-9s from the past two years
  • Proof of any other assets and sources of income
  • Information and documentation on any current debts

Depending on your situation, the lender may request additional documents. For instance, if you’ve been renting, you may need to provide records proving your rental history for the past two years. Or, if you’re divorced, the lender may ask for a copy of your divorce decree showing whether you have to pay alimony or child support.

Getting Preapproved Before You Make an Offer

When considering your mortgage application, the lender will evaluate several factors to determine whether to approve you and at what terms.

These factors typically include:

  • Credit history: The lender will pull your credit report from the three credit bureaus — Experian, Equifax, and TransUnion — to look into your credit habits. This helps the lender predict how likely you are to pay your bills on time, whether you tend to overuse your credit cards, and how experienced you are with credit overall. Each lender and loan type has its own minimum credit score requirements.
  • Debt-to-income ratio (DTI): This important factor measures how much of your monthly gross income goes toward debt. A low DTI ratio (under 36%) makes you more likely to qualify for a mortgage at favorable terms. Plus, it helps ensure a monthly mortgage payment can easily fit into your budget.
  • Loan-to-value ratio (LTV): Lenders calculate this metric by dividing the mortgage loan amount by the home’s value, which is determined during a home appraisal. Ideally, you want to keep it under 80% to avoid paying for private mortgage insurance. You can lower your LTV ratio by putting more money down or choosing a less expensive property.
  • Income and employment: Your potential mortgage lender wants to verify you have stable employment that brings enough income to add such a significant financial responsibility.

All these factors play a crucial role in determining the mortgage terms and amount you can qualify for. You want to know these things beforehand — and so does the seller. For that reason, it’s wise to get preapproved before putting an offer.

PRO TIP

In the aggressive housing market, it’s especially important to get at least one preapproval letter. This is how you let the seller know you’re a serious buyer.

Preapproval is a statement from a lender showing you’re qualified to borrow up to a certain amount. Note that isn’t the same as prequalification, even though terms are often used interchangeably.

“We… say prequalification, you know, because everyone knows this term,” says Jose Diaz, loan officer at Paramount Residential Mortgage Group in Miami, Florida. “But as loan officers, we do a preapproval.”

Prequalification relies on self-reported information and gives you a ballpark estimate of how much house you can afford. Preapproval, on the other hand, requires a more rigorous assessment, including a hard credit pull.

Preapproval signals that you’re a serious buyer. In fact, according to Diaz, a real estate agent may not even agree to show you the house if you haven’t been preapproved.

How to Apply for a Mortgage

Now that you know the terms you’re working with and you’ve ensured you’re an attractive buyer, you can begin the mortgage application process.

If you’re a first-time homebuyer, the ordeal may seem overwhelming. Breaking it down into several steps with a clear timeline can make it easier to understand and prepare for.

Here’s what you can expect:

Step 1: Submit a mortgage application.

Time: About an hour

You’ve got a mortgage preapproval and found the perfect home. It’s time to start filling out mortgage applications.

It’s a good idea to apply at multiple lenders so that you have options and can choose the best loan terms. You can fill out the application online, over the phone, or visit your lender’s office.

Step 2: Schedule a home inspection.

Time: Two to three hours

Even if your lender doesn’t require it, it’s wise to get a home inspection as soon as possible. This step will save you time in case inspection finds any issues and you want to negotiate with the seller — or back out altogether.

Step 3: Choose a lender.

Time: Up to several hours

Now that you’ve received loan estimates from the lenders, review your options and compare the terms.

Look at the total cost in five years, as well as the principal paid in five years. Make sure to also consider the annual percentage rate (APR) and the percentage of the loan you’ll pay in interest. These numbers will help you identify the most cost-effective offer.

Once you’ve made your choice, contact the lender to proceed with the process.

Step 4: Submit any required additional information or documents.

Time: Two to three weeks

When the lender begins to process your loan, you can expect everything on your mortgage application to become subject to scrutiny. This is a normal process — just make sure to respond to your lender’s questions and document requests quickly to move it along.

From here, your application will go to the underwriter for risk assessment. You may need to provide more information and documents.

The ability to get those to the lender is key to the mortgage application process, says Greg McBride, chief financial analyst, for Bankrate.com. (Like NextAdvisor, Bankrate is owned by Red Ventures). “The number one holdup in mortgage processing is a lender waiting on documents from the borrower.”

Step 5: Review the Closing Disclosure

Time: About an hour

Three days before your closing date, your lender is required to send you the Closing Disclosure. Review it to see the final costs of your mortgage and compare it with your Loan Estimate. If any numbers have changed, ask your lender why.

If everything looks good and you want to move forward, you’re ready to close on your mortgage.

Choosing the Right Type of Mortgage Lender

A mortgage will probably be the biggest purchase of your life. And since even the slightest difference in rates can lead to thousands of dollars saved over the life of the loan, interest costs are a crucial factor when choosing a lender.

However, rates and fees aren’t the only things you should consider. You also need to decide what type of mortgage lender works best for you. You can opt for a direct lender, such as a bank or credit union. If you’re an existing customer, you may be able to get better terms. Another option is a mortgage broker that will shop around for the best deal for you. In this scenario, you may have to pay a commission.

Knowing what type and structure of a mortgage loan would work best for you can help you narrow down your options since offerings may vary by lender. For instance, you may have a choice between a conventional and government-backed mortgage.

If you’re a first-time homebuyer, it’s also a good idea to ask lenders about closing costs and down payment assistance programs they work with. Since such programs can save you thousands of dollars, this can become an important factor in your decision.

Other Factors Not On the Mortgage Application

While mortgage terms will guide your decision, you also want to ensure you can count on your lender for transparency, accessibility, and customer support.

Pay attention to the following factors to find the best mortgage lender:

  1. Online Convenience: Online-focused lenders allow you to complete your application fully online. This includes a customized rate quote and the functionality to upload documents.
  2. Price Transparency: Lenders that advertise their rates and fees online without requiring a hard check to access them can make the process easier from the get-go.
  3. Nationwide Availability: Local lenders may offer certain advantages but only provide services in a specific area. Big banks and national lenders, on the other hand, operate in all 50 U.S. states.
  4. Loan Product Variety: Some mortgage lenders may offer a more limited scope of products and services, while others provide a full loan product menu.
  5. Customer Satisfaction: Getting a mortgage can be an incredibly stressful process. You want a lender that will guide you through it and be there to answer your questions and concerns. “If you’re not getting a clear story or clear answers to questions, if there are different surprises, that’s really not a good sign,” McBride says.

How Long Does the Process Take?

According to a report from ICE Mortgage Technology, it took homebuyers 49 days on average to close on a home in August 2021.

However, the situation may have improved since then.

“You won’t find the massive traffic jam and [the] backlog of applications that were prevalent in 2020 and 2021 when homeowners were refinancing in droves,” McBride says. “Rates have climbed very sharply and refinancing activity has fallen off substantially. So the process could potentially go a little quicker and a little smoother.”

Still, the length of the process can vary greatly. If your situation is simple, your lender is quick, and there are no issues with the property, the road to homeownership can be a much shorter one.

However, if you have a more complicated situation, involving self-employment or a recent job change, “the wrinkles can certainly… take things on the more scenic route to mortgage approval.”

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