A walk-through on how to apply for a mortgage

You’ve decided you’re ready to buy a house. It’s an exciting time and you’re all set for that process. Applying for a mortgage is a crucial step in your journey. You can make it easier and increase your likelihood of having your bid accepted by following these steps.

Your 5-step guide to the mortgage application process

Follow these five steps to get a mortgage loan and become a new homeowner.

1. Discover what you can afford

As you begin the mortgage application process, it's important to assess your finances and what amount you can afford to put toward a monthly home loan payment. Look at these factors to help calculate your budget before getting a mortgage:

• Homeowners insurance: Mortgage lenders often require that you purchase homeowners insurance to mainly protect their asset from catastrophic damage. You can expect to pay $100 – $130 per month for a policy that covers a $300,000 dwelling.
• Property taxes: Every state requires that most property owners pay property taxes. However, the amount you owe can change drastically depending on which state you live in.
• Ongoing homeownership expenses: Think about how much you’ll need to pay in terms of potential renovations, maintenance, and homeowners association fees.
• Your debt-to-income ratio: Your DTI ratio represents your debt in comparison to your income. Many lenders will accept a DTI ratio of 43% or less. It’s typically easier getting a mortgage the lower your DTI ratio is.
• Your credit score: A higher credit score can help you qualify for better rates. Consider that your interest rate may be higher the lower your score is.

Using a home affordability calculator is a great way to learn how much house you can afford. Keep in mind that you will also want to consider how much disposable income you want to have available after you pay your mortgage and home-related expenses each month. You may also decide that you want to take certain steps to become more attractive to lenders, such as paying down debt or increasing your credit score.

2. Get preapproved for a loan

Mortgage preapproval shows you how much a mortgage lender is willing to lend you. Having a preapproval letter from your lender shows real estate agents and sellers that you’re ready to buy a home. Mortgage lenders calculate the amount they will lend you and your interest rate by assessing your:

• Income
• Credit history
• Credit report
• Assets
• Credit score

While it’s common to get prequalified early on in the home buying process, moving from a prequalification to a preapproval is the logical next step. A preapproval is a more official step that requires the lender to verify your credit history and other financial information.

With Rocket Mortgage^®, you can also get a Verified Approval Letter, which is an initial loan approval manually completed by an actual underwriter.

3. Find the right home for you at the right price and put in an offer

Once you have determined how much you can afford, start looking at homes. When you find one that meets your needs, you can then put in a bid and submit your earnest money deposit to secure the offer on the home.

4. Finalize your choice of mortgage lender and loan type

Once your offer is accepted on a new home, you can choose a mortgage lender.

There are many different lenders and different kinds of loans. Some common types are conventional mortgages, Veterans Affairs mortgages, Federal Housing Administration loans, and jumbo loans. Depending on your goals and finances, you’ll need to weigh which type of mortgage is right for you.

Be sure to shop around and get several Loan Estimates so that you can compare them and find the best deal for your financial situation. 

5. Submit your mortgage application

It’s time to fill out a mortgage application. It’s best to gather in advance the documents lenders need to process your application. Here are examples of things you may be asked to submit with your application:

• Recent income tax returns
• Recent W-2 forms
• Recent pay stubs
• 1099 forms
• Business tax returns
• Checking and savings account statements
• Retirement or investment account statements
• Documents for the sale of assets
• Proof and verification of gift funds deposited in the last 2 months
• Documents that show your debts, such as student loans, auto loans, etc.

Once you’ve submitted all of the necessary documents to complete your application, you’ll get a Loan Estimate in a couple of days that will disclose the terms, rates, and fees of your home loan.

What to expect after you apply for a mortgage

We’ve outlined how to successfully apply for your mortgage. Here’s what to expect after you formally submit your application.

Mortgage underwriting

The underwriting process consists of your mortgage lender reviewing your application and verifying your income, assets, debt, and property details. Once verification is complete, you’ll receive final approval on your loan application. For the borrower, no action may be required at this step unless the lender has any specific questions or needs additional documents.

Underwriting can take several days to several weeks. Once complete, you’re cleared to close on your loan. Closing usually happens a few days after you’re cleared. Borrowers will receive either a call or an email stating that their mortgage loan has been approved. The good news will usually come from a loan officer.

Prepare your down payment and closing costs

This is where down payments and closing costs come into play. You’ll need to have the down payment for the property, closing costs and proof of homeowners insurance.

This information can be found in the Closing Disclosure, which you’ll receive after mortgage underwriting has been completed. You’ll provide the cash needed for your down payment, closing costs, and any other fees at your closing meeting.

Close on your new home

The final step is to attend your closing day meeting and officially become a homeowner. At this closing meeting, you’ll sign all necessary documents and ask any remaining questions regarding the sale or the property itself.

The entire closing process will take about 30 – 45 days. The closing meeting itself will take only a few hours.

Typically, the closing attorney or title company conducts this meeting in person, but e-closings are also available. An e-closing is one where the mortgage loan closes electronically. Typically, this is handled through a secure online portal that lets buyers and sellers electronically sign all the closing documents. Once everything is signed and handed over, you’ll receive the keys to your property, and you’ll officially be able to move into your new home.

Mortgage process FAQs

The mortgage process can bring up lots of questions for home buyers. Consider some of these frequently asked questions.

What is the minimum income I need to qualify for a home loan?

There is no set minimum income that you'll need to qualify for a home loan. Instead, the amount of income can depend on a variety of different factors. These factors include the amount of loan that you are applying for, your DTI, your credit score, and how much of a down payment you have. If you are not sure what income you'll need to qualify for your home loan, you can work with your loan officer to get a better idea.

How long does it take to get a mortgage?

The time it takes to get a mortgage depends on many factors, such as the loan type, lender, and market conditions. If everything goes smoothly, home buyers can expect to get their mortgage after about 1 – 2 months.

What is lender processing?

Lender processing refers to a mortgage lender going over all required documents and information needed to make sure the borrower qualifies for the loan they’re applying for.

What is a mortgage underwriter?

This is an expert who looks at an applicant’s finances to determine if they are a good risk for a loan. You can improve your chances of being approved for a loan by having a good credit score, paying down debt, and showing consistent earnings.

What are some things that might delay getting a mortgage?

There are plenty of factors that might delay the home buying process, such as missing documentation, title issues, or even negotiations with the seller. You also may experience delays due to appraisals, inspections, or necessary repairs.

The bottom line: Prepare for these steps to become a homeowner

The steps in the home loan application process can be easier to tackle if you know what to expect. Do your research and use your real estate agent as a resource to make the experience smoother and prevent potential hiccups.

Ready to own a home of your own? Start your mortgage application today.