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How To Get A Mortgage: A Step-By-Step Guide

8-minute read

You probably already know that a mortgage is a type of loan that you use to buy a home. It’s a good idea to learn as much as you can about getting a mortgage before you start shopping for a home. Let’s take a look at what the mortgage process looks like when you apply for a loan and how you can maximize your chances of getting approved for one.

What Are Mortgage Lenders Looking For?

Lenders look at a few different factors when you apply for a loan. A good way to remember what mortgage lenders look for is to use the acronym “IPAC,” which stands for “income, property type, assets and credit.” Let’s look at each of these factors in a little more detail.

Income

One of the first things that mortgage lenders consider when you apply for a loan is your income. There is no set dollar amount that you need to earn each year to be able to buy a home. However, your mortgage lender does need to know that you have enough money coming in so you’re able to pay back your loan.
 
Your lender will want to look at your employment history, your monthly household income and any other forms of income you have coming in, like child support or alimony payments.

Property Type

The type of property you buy affects the type of loan you can get. This is because different types of property change the level of risk for your lender. Want to buy a small single-family home that you plan on using as your primary residence? You’ll probably get better terms because lenders know that housing costs already factor into most people’s budgets and you’re more likely to stay up to date with your payments.
 
Investment properties, on the other hand, are riskier for lenders because investment property mortgage payments will take a backseat to primary residences if the owner runs into financial hardship. Expect your lender to require a larger down payment and a higher credit score before you get a loan for an investment property.
 
Interest rate and buyer requirements vary depending on the type of property you’re after. Keep in mind that not every lender finances every type of property (mobile, manufactured, commercial, etc.).

Assets

Lenders want to know that you have some extra money in the bank when you apply for a loan. This assures the lender that you’ll still be able to make your payments if you run into financial trouble. Your lender will ask to take a look at your assets, which includes any type of account that you can draw cash from. Savings accounts, retirement accounts and taxable investment accounts are three examples of assets.
 
Your lender might also want to know about your non-liquid assets. Non-liquid assets aren’t cash accounts. Vehicles, properties or self-owned businesses are all examples of non-liquid assets.

Credit

Your credit history and your credit score both play a major role in your ability to get a mortgage. A high credit score tells lenders that you make your payments on time and you don’t have a history of borrowing too much money. A low credit score makes you a riskier borrower because it tells lenders you may have a history of mismanaging your money.
 
There is no exact credit score you need to have to get a conventional loan. For a government-backed loan, you’ll need a credit score of at least 580 or 620, depending on which loan you choose. A higher credit score can give you access to more lender options and lower interest rates. If you have a lower score, it’s a good idea to try to boost your credit score for a few months before you apply for a loan.

What Documents Do I Need To Get A Mortgage?

Get all your paperwork in order so you can speed up the process before you apply for a loan. Let’s go over the documentation you’ll usually need when you apply for a mortgage.

Proof Of Income

Your lender will ask you to provide a series of paperwork in order to verify your income. Some documents you might need to provide include:

  • At least 2 years of federal tax forms
  • Your two most recent W-2s and pay stubs
  • 1099 forms or profit and loss statements if you’re self-employed, or other additional documents
  • Divorce decrees, child support decisions and any other legal documentation that confirms that you’ll continue to receive payments for at least another 3 years, if applicable
  • Legal documentation that proves you’ve been receiving alimony, child support or other types of income for at least 6 months, if applicable

Credit Documentation

Your lender will ask you for verbal or written permission to view your credit report. They’ll look at your credit history and search for factors (like a bankruptcy or foreclosure) that would disqualify you from getting a loan. If you do have a bankruptcy or foreclosure on your credit report, you’ll have to wait a few years before you’re eligible for a mortgage.
 
If you had an extenuating circumstance that damaged your credit, it’s a good idea to explain this to your lender with proof. For example, if you missed a few payments on your credit card bills due to a medical emergency, you may want to give your lender a copy of your medical bills. This proves to your lender that the bad marks on your report were the result of a one-time instance, rather than a pattern.

Proof Of Assets And Liabilities

Your lender might ask you for some or all of the following when they verify your assets:

  • Up to 60 days’ worth of account statements that confirm the assets in your checking and savings accounts
  • The most recent statement from your retirement or investment account
  • Documents for the sale of any assets you got rid of before you applied, such as a copy of the title transfer if you sold a car
  • Proof and verification of any gift funds deposited into your account within the last 2 months

Your lender may also ask you for supplemental information on any debts you owe, like a student loan or an auto loan. Cooperate with your lender and provide any requested information as soon as you can.

How To Get A Mortgage With Rocket Mortgage®By Quicken Loans®

Once you have all of your documentation in order, it’s time to start searching for a loan. Here’s what you can expect when you apply for a home loan with Rocket Mortgage®.

Step 1: Apply For Mortgage Preapproval

Preapproval is the process of learning how much a lender is willing to lend to you. When you apply for a preapproval, lenders take a look at your income, assets and credit, and tell you how much they can lend you. They’ll also determine your interest rate. A preapproval is different than a prequalification. Prequalifications are less accurate than preapprovals because they don’t require asset verification. Make sure you get a preapproval instead of a prequalification.
 
Getting preapproved for a loan is a good idea because it gives you an accurate idea of how much you can afford to spend on a home. This will help you narrow your property search, and it also makes you more appealing to both sellers and real estate agents.

Check Your Credit

The first thing you’ll do when you apply for preapproval is answer a series of questions about yourself, your income, your assets and the home you want to buy. You can then give Rocket Mortgage®permission to take a look at your credit report. Your credit report is a record of your borrowing history from any lenders and creditors you’ve borrowed from in the past, including credit card companies, banks, credit unions and more.
 
Use the Rocket HQ app to help you track and understand your credit profile. You’ll be able to track your TransUnion® credit report, which is updated every week with your VantageScore 3.0® credit score.

Customize Your Personal Mortgage Solutions

After we verify your credit, Rocket Mortgage® will give you a few mortgage options that you can customize to fit your needs. We’ll show you a few different mortgage solutions and how much you can qualify for. You can also learn more about your individual interest rates, loan types you are eligible for, monthly payments and down payment requirements.

Step 2: Get Your Approval Letter

Once you find the best mortgage solution for your needs, you can see if you’re approved online. If you are, we’ll send you a Prequalified Approval Letter that you can use to begin house hunting. If you want an even stronger approval, you may want to consider contacting a Home Loan Expert and applying for a Verified Approval.

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Step 3: Find A Property And Make An Offer

Now comes the best part – finding the home that’s right for you and your family. It’s a good idea to connect with a real estate agent in your area when you start viewing properties, especially if you’re buying your first home. Your real estate agent will help you narrow your search and show you properties that fit both your budget and your needs.
 
When you find the home that’s right for you, your real estate agent will help you submit an offer. You might have to do a bit of negotiating with the seller before you agree on a final price. Once the seller accepts your offer, it’s time to move to the final stages of the home buying process.

Step 4: Details Are Verified

During the verification process, an underwriter takes a closer look at your assets and finances. You’ll provide documentation and paperwork that backs up the information you submitted when you applied.
 
Your lender will also need to verify your property details. This usually involves ordering an appraisal, verifying the home’s title and scheduling any other state-required inspections. As soon as underwriting finishes, you’ll receive a document called a Closing Disclosure.
 
Your Closing Disclosure tells you everything you need to know about your loan, including your monthly payment, down payment, interest rate and closing costs. Make sure your Closing Disclosure is similar to your Loan Estimate, which you should have received from your lender 3 days after you applied for your loan.

Step 5: Closing

Once you get your loan approved, it’s time to attend a closing meeting. At closing, you’ll have a chance to ask any last-minute questions you have about your loan. Remember to bring your Closing Disclosure, a valid photo ID, your down payment and a check for your closing costs. Once you sign on your loan, you’re officially a homeowner.

Summary

Lenders look at a number of factors when you apply for a mortgage. They’ll take a look at your income, the property type you want to buy, any assets you have and your credit. You’ll need to provide documentation to prove your income, assets and credit before you can get a mortgage loan. The specific documentation you need to provide varies by lender and loan type.
 
The first step in getting a mortgage is to apply for a preapproval. Preapprovals give you a good idea of how much you can get in a loan and makes it easier to shop for homes in your budget. Once you’ve gotten a preapproval, you can start viewing homes with the assistance of a real estate agent.
 
Your agent will also help you make an offer on the right home once you find it. You’ll need to get full approval from your lender once the seller accepts your offer. Full approvals also include underwriting and an appraisal. Once you’re approved, you’ll attend a closing meeting, sign the closing documents, and pay your down payment and closing costs.

Find out what you can afford.

Use Rocket Mortgage® to see your maximum home price and get an instant online approval decision.

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