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Finding your dream house is only one small part of the homebuying process. Unless you’re purchasing that property in all cash, you’ll also need to apply for a mortgage loan.
Though purchase loans typically take around 45 days from application to closing day, according to the most recent data from mortgage technology company Ellie Mae, the process starts long before your application is submitted.
What to do before you apply
Here are the steps you should take in the lead-up to filling out your application — as well as how long each step may take you.
- Shop around and compare rates
- Get pre-approved
- Make an offer on a home
- Gather all the documents you’ll need to apply
1. Shop around and compare rates
Time estimate: A few minutes (using Credible); up to a few days if contacting lenders
Every lender offers different terms, so it’s a good idea to compare rates before making a decision. Shopping around can ensure you find the right loan for your situation and, because mortgages are typically so large, can also help you find a lower rate and save money in the long term.
When shopping around for mortgage lenders, you’ll want to consider things like rates, fees, and loan products. Credible makes comparing multiple lenders quick and easy; you can compare loan options from our partner lenders in the table below in just three minutes.
Loading widget - purchase-rate-table
Learn More: What You Need to Know About Working With a Mortgage Broker
2. Get pre-approved
Time estimate: A few minutes
Getting pre-approved by a mortgage lender means that the lender thinks you’re a good candidate for a loan. Once you’re pre-approved, you’ll get an official pre-approval letter, stating how much you’ll likely be able to borrow. You can use this number to guide your home search and ensure you stay on budget.
A pre-approval can also give sellers more confidence in your offers and help you be a more competitive buyer (not all buyers take this step).
What you need to know: To get pre-approved, you’ll usually need to provide your income, estimated monthly debts, credit score, and some info about what type of home you’re looking for. In some cases, the lender may require financial documentation to support these details.
Learn More:
- Your Mortgage Pre-Approval Checklist: Every Document You’ll Need
- Does Mortgage Pre-Approval Affect Your Credit Score?
3. Make an offer on a home
Time estimate: A few weeks to a few months, depending on your market
Making an offer on the home you want to purchase is the next step — and your pre-approval letter can help you get there. Include the letter in any offers you submit and give sellers confidence in your bids.
Tip: Being pre-approved going into your home search can also help you stand out in a bidding war. So if you’re purchasing a house in a market that’s hot, applying for pre-approval is even more critical.
Once your offer is accepted, you’ll sign your purchase and sale agreement, moving you one step closer to homeownership.
4. Gather all the documents you’ll need to apply
Time estimate: A couple of hours, depending on how organized you are
When filling out your official loan application, you’ll need some documents to prove your income, debts, assets, and more. Lenders use this information to gauge your risk, as well as assess how much you can comfortably afford payment-wise.
| Document | Details |
|---|---|
| Purchase and sale agreement | Must be signed |
| W-2s | Last two years for all buyers applying for the loan |
| Tax returns | Last two years for all buyers applying for the loan |
| Pay stubs | For the last 30 days |
| Bank and savings account statements | For the last two months; must include investment accounts, too (401Ks, IRAs, etc.) |
| Profit and loss statement | If you’re self-employed |
How to apply for a mortgage
If you’re ready to apply for a mortgage, here are the important steps you’ll need to follow — along with the estimated time each may take to complete.
- Fill out your mortgage application
- Compare offers using your loan estimates
- Commit to a lender and wait for approval
- Close on your loan
1. Fill out your mortgage application
Time estimate: About one to two hours per application
The application will ask about your income, monthly debts, employment history, and assets. You’ll also need to provide details about the home you’re purchasing and agree to a credit check.
To make sure you’re getting the best rate and terms, you may want to fill out applications for several lenders.
Be careful: Filling out a mortgage application will result in a hard credit inquiry (and hurt your score). To prevent your credit score from getting dinged several times over, submit your applications within the same 45-day window.
Each lender will then review your application and provide you with a loan estimate — an official form detailing all the fees and charges your lender or any third parties will charge at closing should you proceed with the loan. Use these documents to compare your offers and choose which lender to move forward with.
2. Compare offers using your loan estimates
Time estimate: About an hour
Once you have your loan estimates in hand, compare the interest rate on the first page. Be sure to check the top, right-hand corner for when that rate will expire. Since rates fluctuate daily, you want an expiration date that gives you plenty of time to close on your loan.
You should also flip to the third page of your loan estimate and view the “Comparisons” section. Here you’ll find the five-year total cost and principal paid on the loan, APR, and total interest percentage (TIP). These measures give you an idea of the long-term costs of each loan and can be a good way to compare your options.
For help understanding what each section of the loan estimate indicates, check out the Consumer Financial Protection Bureau’s explainer.
3. Commit to a lender and wait for approval
Time estimate: Up to a few weeks
Choose the best offer, and let your loan officer know you’re ready to move forward with the process. They may request additional documentation along the way, so make sure you respond quickly to prevent your loan from getting delayed.
Your loan will soon move into underwriting, when all your financial information is double-checked and verified. The underwriter will look to assess your overall risk as a borrower.
Specifically, your loan’s underwriter will be looking at:
- Your credit history
- Your employment history
- Your property’s value and condition (they’ll order an appraisal if one is needed)
- Your debts and assets
- Your financial reserves
Using this information, they’ll work to verify that you 1) meet the requirements for the loan you’re applying for and 2) can afford the mortgage payment that comes with it.
Learn More: 4 of the Best Mortgage Lenders
4. Close on your loan
Time estimate: A couple of hours to sign the paperwork
Once your loan is through underwriting, you’ll be given a closing appointment, which usually occurs at the settlement, escrow, or title company you’re working with. That’s when you’ll sign your closing paperwork, pay your closing costs and down payment, and finalize your home purchase. This part of the process can take a few hours to complete. If you use a real estate agent, they’ll usually attend this appointment with you.
Pro tip: Consider bringing a cashier’s check for your closing costs and down payment. Wire fraud is on the rise in real estate transactions, and wiring your money could put your funds at risk of theft.
After you’ve signed your paperwork, your lender will fund the loan and the settlement, escrow, or title company will transfer funds to the seller and various service providers. You can then get your keys and are free to move into the house.
If you’re considering a home purchase, be sure to shop around and compare loan options. Credible makes this easy — you can compare multiple lenders in as little as three minutes.
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