Buying a home is the biggest financial decision you’ll ever make. And unless you’ve saved hundreds of thousands of dollars, you’ll need to apply for a mortgage to make your homeownership dream a reality.
The mortgage application process can seem overwhelming, but it doesn’t have to be. Whether you’re a first-time home buyer or want to purchase your second home, here’s everything you need to know about how to apply for a mortgage loan.
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1. Get your finances in order.
Before you apply for a mortgage, you’ll want to review your finances to make sure you can afford it. Your credit is one of the major factors lenders consider when evaluating your mortgage eligibility and interest rate, so check your credit score to see where it stands. If your score is on the low side, find ways to improve it before applying for a mortgage.
You’ll also want to save enough for a down payment and closing costs. A larger down payment may improve your approval odds. And if you put down at least 20%, you’ll avoid private mortgage insurance (PMI).
Finally, make sure you can afford the monthly mortgage payments and ongoing expenses of owning a home. These include property taxes, maintenance and repairs, homeowners insurance, and utilities.
2. Gather the documents you’ll need.
When applying for a mortgage, lenders will ask for documentation to verify your identity, income, debts, and assets. Gather these documents beforehand to ensure a smooth process:
- Your government-issued ID
- Two most recent W-2s and recent pay stubs
- Tax returns for the past two years
- 1099 forms or business tax returns if you’re self-employed
- Statements for your checking, savings, investment, and retirement accounts
- Outstanding debts you owe, such as student loans, auto loans, and credit cards
- Divorce decree (if applicable)
- Proof of any additional income (alimony, rental income, etc.)
Having these documents handy will speed up your mortgage application process.
3. Shop around for lenders.
Don’t make the mistake of settling on the first lender you get. Mortgage rates and terms vary significantly by lenders. Even a small percentage difference in interest rate could save you thousands over time.
To get the best possible mortgage rates and terms, compare rates from at least 3–5 lenders, which can be banks, credit unions, online lenders, or mortgage brokers. Look at annual percentage rates (APRs), not just interest rates. These measure the interest rate plus additional fees so you can see the total annual cost of borrowing.
You could also ask friends and family who recently bought a home about the lender they used. Additionally, your real estate agent might know the best lenders in your area.
💡Pro tip: Consider working with a mortgage broker. These professionals have relationships with multiple lenders and can help you find the best rates and terms. Plus, they have access to wholesale rates that may be lower than what you'd find on your own.
Picking the right lender when buying a house could mean the difference between a smooth and affordable mortgage process and an overwhelming and expensive one. Whatever lender you look into, make sure you read online reviews from past customers to ensure they offer great service.
4. Get prequalified or preapproved.
Before house hunting, most buyers get prequalified or preapproved for a mortgage. While these terms are often used interchangeably, they’re different steps in the mortgage process.
A prequalification is an informal estimate of how much you may be able to borrow based on the financial information you provide. The process takes a few minutes and doesn’t require you to submit any documents for verification.
A preapproval, on the other hand, involves a thorough review of your finances. Lenders will need proof of your financial information to provide a loan estimate. Once approved, you’ll get a preapproval letter, which often carries more weight than a prequalification when you’re making an offer on a home. The preapproval process usually takes longer than getting prequalified.
It’s important to note that during preapproval, lenders perform a hard credit check, which may have a slight negative impact on your credit score. However, if you get multiple preapprovals within 14–45 days, all the inquiries will count as one. So, don’t be afraid to compare multiple lenders.
5. Start house hunting and make an offer.
Once preapproved, you’ll know how much house you can afford. But just because you can afford a certain amount doesn’t mean you should borrow it all. Be realistic about your lifestyle and any income changes that may happen in the future.
It’s also a good idea to create a home buying checklist so you can narrow down your search. As you shop around, work with a real estate agent who will help you pick the best neighborhood based on your needs, navigate any challenges, and spot red flags. Once you find your dream home, the agent will also assist you in crafting a competitive offer based on the local market conditions.
6. Apply for the mortgage and lock in interest rate.
Once the seller accepts an offer on a home, it's time to officially apply for the mortgage. During this stage, you’ll fill out a mortgage application (often called a Uniform Residential Loan Application or Form 1003) and submit all the documents mentioned earlier.
The lender will review your application through a process called mortgage underwriting and provide a loan estimate form within three days of receiving your application. The form discloses all the details of the loan you qualify for and the closing costs.
Lenders will give you a loan estimate based on your financial profile and current market conditions. However, the rate you get during preapproval may not be the same when closing on the house. That’s why locking in your interest rate might be important.
Remember that your interest rate has a huge impact on the total cost of borrowing. Even a slight difference can mean thousands of dollars in additional interest over the life of the loan. Once you lock in your interest rate, it won’t change for a set period of time, regardless of whether the rates go up or down.
Most lenders will allow you to lock in your rate for 30, 45, or 60 days. But it’s important to align your rate lock timeline with your expected closing date. If your lock expires before closing, you may have to pay a rate lock extension fee or lose the locked-in rate and accept the current market rate.
What happens with your mortgage loan before and after you make an offer?
This part of the mortgage process can be confusing, especially for first-time home buyers.
Before you make an offer on a home, everything your lender is doing revolves around you —
your income, assets, debts, and creditworthiness. The lender’s goal here is to determine whether you’re a responsible borrower and how much you can reasonably afford to borrow. After reviewing everything, you’ll get a preapproval letter based on your financial profile, not the house you intend to buy.
Once the seller accepts your offer, the lender shifts their attention to the property. They’ll update the mortgage loan with the property details, order a home appraisal, conduct a title search, and schedule a home inspection.
From there, your loan enters underwriting, where the lender carefully evaluates everything. If they require any additional documentation, you’ll receive a list of conditions. Once you meet all the conditions, you’ll get a “Clear to Close,” meaning you can close on your mortgage. At that point, you’re officially a homeowner.
✅ Ready to take the next step? Clever connects you with trusted real estate agents who can walk you through the mortgage application process from start to finish. Get the guidance you need—and the savings you deserve—with Clever. Get matched with local Clever agents today.