How to Get a Mortgage: A Step-by-Step Guide

The best time to get a mortgage is before you’ve begun shopping for a home. But if you’ve never done it before, you might not know where to start – and that’s normal.

A home loan helps you finance a home when you don’t want to (or can’t afford to) pay for the whole thing in cash. It’s a huge financial and legal commitment. Moreover, it’s still the most common way people buy homes in the U.S. Let’s demystify the mortgage process so you understand how it works and what steps you need to take to have the best experience.

Your first step is to figure out where you stand financially. That means establishing how much money you have in the bank, how much you owe on other debts, and your credit score. Lenders will look at all of this information when deciding whether to loan you the funds to buy a house.

Lenders typically reserve the best terms and lowest interest rates for people with good or excellent credit. A home loan without good credit is possible, but you may pay higher rates. Most lenders require a credit score of at least 620 for a conventional loan, but you’ll see better rates if your score is in the mid-700s or higher.

If your credit isn’t great, you can start working on building it up today. 

• Review your credit reports and ensure everything is correct because errors could affect your score. 
• Ensure all your payments are on time, and catch up on any late payments. 
• Don’t open any new credit cards or financing until after you buy your house. Doing so could affect your credit and make it tougher to get approved for the mortgage.

Another angle to consider is your debts compared with your earnings, or your debt-to-income ratio (DTI). Lenders want to know that you can pay your mortgage loan on top of your other obligations, such as student loans or car payments. 

The ideal DTI is under 36%, but that’s not always possible in some situations. Some mortgages, like FHA loans, allow for a higher DTI. Here’s how to calculate yours: 

• Total up your monthly debt payments (car note, student loan, personal loan, credit card debt, and so on)
• Divide this number by your monthly gross income
• Multiply by 100 to get the percentage.

For example, if your monthly debts add up to $1,500 and your monthly income is $5,000:

• 1,500 ÷ 5,000 =0.26
• 0.26 x 100 = 26%

Your DTI would be 26%.

Your down payment is like paying a deposit on the house. It’s your first payment toward owning the home in full. Like buying a car, the more you put down, the less you have to finance (and pay interest on).

Although 20% down is a good rule of thumb because it helps you avoid mortgage insurance, you can put down much less. Many conventional lenders allow you to put down 5% if you have decent credit and sufficient income. And with certain government-backed loan types, like FHA, VA, or USDA loans, you can put down 3.5% or even $0, depending on your circumstances.

Now that you know where you stand, you can look for a mortgage lender. Different lenders offer different types of loans, different rates, and even different loan application processes. 

“Personally, I've found that mortgage brokers can be particularly helpful for first-time buyers, as they often have access to a wide range of products and can offer personalized guidance throughout the process,” says Ryan Fitzgerald, a real estate agent and owner of Raleigh Realty.

A mortgage broker can help you find the right loan for your needs. Still, it’s a good idea to familiarize yourself with the options available, including banks, online lenders and credit unions.

You don’t have to know the fine print of every mortgage type, but it does help to understand the basics when you’re looking for a lender to find one who offers the right home loan for your needs. The requirements to qualify will vary depending on the type of mortgage you choose. 

• Conventional mortgages: These are your typical home loans, and you’ll want a credit score of about 620 or higher to qualify. 
• Fixed-rate mortgages: These have one interest rate that stays the same for the whole loan term.
• Adjustable-rate mortgages: After an initial rate period, which could last three or five years, your rate will adjust periodically. This will cause your mortgage payments to change, too.
• FHA loans: These are government-backed loans insured by the Federal Housing Administration and typically offer friendlier credit requirements than conventional loans. The minimum credit score requirement is 580 with 3.5% down or 500 if you put down 10%.
• VA loans: A VA loan is a government-backed loan that is issued by the U.S. Department of Veterans Affairs (VA). Eligible veterans and military service members can get a VA loan as part of their benefits package. You might not need to put any money down and there’s no minimum credit score to qualify, although individual lenders have their own terms.
• Other mortgage types: There are many different types of mortgages, too, that may be right for your situation. Construction loans can help if you’re building a home, USDA loans are designed for eligible rural locations, and jumbo loans can help when buying a higher-priced home, just to name a few examples. Your city or state may even have special loan programs for first-time home buyers, teachers, emergency responders and other groups.

About two-thirds of buyers (63%) prefer applying for a loan digitally, according to the 2024 Borrower Insights Survey from ICE Mortgage Technology. If that sounds like you, look for a mortgage lender with an online loan application process. Applying online lets you go at your own pace, apply at all hours of the day or night, and not worry about having to schedule a meeting with a broker. On the other hand, online lenders don’t offer as much hand-holding as traditional lenders.

If you’re more of the in-person type, you might prefer a traditional lender. You’ll have a loan officer who works with you directly to fill out your application, collect the required documents and answer any questions. Keep in mind that some traditional lenders may have higher rates and take longer to close than online lenders.

Request a mortgage preapproval when you’ve found a lender that seems right for you. A preapproval is when a lender looks at your financials and lets you know how much you could be approved for and your likely rate.

To get preapproved, you’ll typically fill out a form asking for:

• Your name and contact information
• Income and monthly expenses
• Location and price of the property you’re considering
• Assets and debts

The lender will check your credit, review your information, and either decline your preapproval or issue you a preapproval letter with the loan amount, interest rate and estimated monthly payment.

An essential step in the mortgage application process is providing the lender with documents that prove your income, employment and assets. You’ll need to provide these papers to be preapproved, so it’s a good idea to collect them now. 

Standard documents you’ll need: 

• Tax returns for the last two years
• Pay stubs for the last one to two months
• Several recent bank statements
• Proof of other income if you’re using it in your application

Sometimes, you might need additional documents as well if you have a less-common situation:

• Military service records and/or certificate of eligibility for VA loans
• 1099s and additional tax returns if you’re self-employed
• Gift letters if you’re using gift money for your down payment

With your mortgage preapproval and your documents ready, it’s time to search homes for sale and call your real estate agent to find the right property. You’ll need to make an offer on a home and have it accepted before you can formally apply for a mortgage. There might be a little back-and-forth negotiating before you and the seller are satisfied, but that’s normal.

When the offer is accepted, you can apply for the mortgage. This is when things start to get real, so take your time and fill everything out as accurately as possible. Any mistakes or hiccups could cause problems with the verification process, so double-check your answers as you go.

The mortgage application typically includes much of the same information as the preapproval, including:

• Name, contact information, date of birth and Social Security number
• Employment information, including your employer, how long you’ve worked there and your income
• Bank account information, including assets you hold, such as savings accounts or investments
• Debt details such as student loan or auto loan information
• Information about the home, including location and year built

After the lender receives your application, they’ll begin reviewing it and verifying the information you provided to ensure they want to lend to you. This process is called underwriting, and it can take several weeks (or more if the lender has questions or needs more documentation). 

During the underwriting process, the lender will also check on details about the house. They’ll want to ensure it’s in good condition and that no one else but the seller has a claim to it. They’ll run a title search to verify the home’s owner.

You’ll need to order an appraisal so the lender can have an objective, professional opinion on the house's value, and it’s a good idea to arrange a home inspection, too. An inspection could uncover problems that might change your mind about buying the home.

If everything looks good and the verification doesn’t turn up any problems, the lender will schedule a closing, which is the official transfer of ownership. Closing is also when you’ll sign your loan documents, which include: 

• Your mortgage promissory note
• The escrow disclosure statement
• The deed that transfers the title

It can take a long time to review all the legal documents at closing, but they are essential for ensuring the transaction is complete and lawful. If you don’t understand something, ask questions until you do.
You might close at an office with the seller, your agent and some lawyers – or you might close electronically by providing your signature digitally from home. It depends on your loan, your state and the mortgage lender, but you’ll know what to expect beforehand.

Closing is also when you’ll need to pay your closing costs, which are the various expenses associated with buying the home and taking out a mortgage. Closing costs (your “cash to close”)  typically include:

• Loan origination fee
• Recording fee
• Appraisal fee
• Title search fee
• Government taxes, including prorated property taxes
• Other fees noted in your official Closing Disclosure

Aside from your down payment, closing costs typically add up to about 3% to 5% of the loan amount. You can bring a cashier’s check or certified check to pay, or arrange a wire transfer. 

After you’ve closed on the home and received the keys, you’re officially a homeowner. At this point, you should have a homeowners insurance policy to protect your new investment from sudden catastrophes like windstorms or fires. However, now that you own the home, you’ll be responsible for its maintenance and upkeep to keep it in prime condition. That means: 

• Regularly inspecting the roof and siding for lifting shingles or broken siding and repairing them right away.
• Cleaning and maintaining the gutters.
• Making sure the heating, ventilation and air conditioning are working properly.
• Changing furnace filters regularly.
• Repairing plumbing problems right away.
• Fixing, patching and painting the walls and ceilings.
• Keeping the yard and other exterior areas clean, trimmed and maintained.

If your home comes with a home warranty, that might provide extra peace of mind. Regardless, it’s a good idea to get the names of reputable plumbers, HVAC experts and electricians before problems arise. 

To get the right mortgage for your new home, you’ll need to shop around for a lender who offers the type of home loan you need at a good rate. You can (and should) compare offers from at least three different lenders to see what options are available to you based on your credit score, down payment savings and income. Look for a mortgage company with a good reputation and high scores for customer service so you’ll know they’ll take care of you if you run into problems. 

A mortgage broker can help you find the right mortgage, but you should prepare by learning as much as possible about different mortgage types and the home loan process before you start.