• To get a mortgage loan, you need to assure a lender that you have the resources to repay a home loan and are financially responsible enough to do so.
  • Lenders consider your credit score, income, assets, and debts, as well as the property you’re purchasing, when determining if you qualify for a loan. 
  • You can, and should, have a lender review your finances before you start shopping for homes to confirm that you are likely to qualify for a home loan and how much you can borrow. This is known as mortgage pre-approval.

Getting a mortgage loan is a critical step in the homebuying process for anyone requiring financing to complete the purchase. However, this milestone can feel overwhelming, particularly for first-time buyers who are not familiar with the process of applying for a home loan. 

This article will show you how to get a mortgage, step by step.  

How To Get a Mortgage

A mortgage is one of the biggest financial commitments most people make – and getting one starts with showing you’re financially prepared to take that step. This requires showing proof of funds to cover the upfront expenses, proof of income to cover the ongoing expenses, and proof that you generally manage debt responsibly. 

The steps in getting a mortgage include:

  • Preparing for the mortgage process;
  • Choosing the right mortgage;
  • Navigating the mortgage application; and
  • Closing on your home loan.

Here is a detailed look at each of these steps.

Preparing for the Mortgage Process

Before you apply for a mortgage, you’ll need to prepare for the process by reviewing your credit, calculating your budget, and saving for your down payment. Consulting a mortgage loan officer from a reputable lender can help guide you through your options – engaging with them early on can be a smart move.

Reviewing Your Credit Score

Credit scores play an important part in determining whether you qualify for a mortgage loan and what mortgage interest rate lenders can offer. So it can be helpful to know your credit score before applying for a loan. Americans are entitled to a free copy of their credit report annually.[1]

Lenders may look for a credit score of at least 620, although a lower score can be considered with certain loan types.[2] High credit scores may earn favorable financing terms on mortgage loans, such as lower interest rates, which can save you money by reducing your borrowing costs. 

If your score is below 620, or you want to increase your score to earn a better interest rate, there are ways to improve your credit score.

Calculating Your Budget and Affordability

As a homebuyer, you need to make sure you have enough money to afford the upfront expenses as well as the ongoing costs of homeownership. 

Upfront costs of buying a home include:

  • The down payment. The down payment is the amount of the purchase price you pay upfront. Typically expressed as a percentage of the purchase price, most buyers need at least 3-5% for a down payment, depending on the loan type. However, putting down 20% or more can reduce your overall cost of borrowing by lowering your interest rate and eliminating the need for mortgage insurance (the insurance policy that allows lenders to offer low down payments by protecting them against borrower default).[3] Specialty loans (like VA loans and USDA loans) offer 0% down options, but not all buyers qualify for these loan programs. You can use an online calculator to estimate your down payment amount.
  • Closing costs. Closing costs are the fees incurred as part of a real estate transaction. For buyers, closing costs include expenses like loan origination fees, appraisal fees, and title search fees, and may come to 3-6% of the purchase price.[3] You can use an online calculator to estimate closing costs.  
  • Moving expenses. Often forgotten when budgeting for a home purchase, moving expenses can vary widely depending on how far you’re moving and how much of the work you’ll do yourself. 
  • Any time-sensitive repairs or renovations. If the home needs urgent work done, you’ll want to make sure you have the funds available to cover those costs upfront.    

Ongoing costs of homeownership include:

  • Monthly mortgage payments. Mortgage payments typically include the principal balance and interest, as well as homeowners insurance premiums and property taxes. 
  • Any homeowners association (HOA) dues. Homes that are part of an HOA incur monthly fees for shared community expenses such as common area maintenance.
  • Home maintenance. Homes require regular upkeep, from cleaning to appliance repair. There are also larger periodic expenses like replacing a roof or upgrading the heating and cooling system. Setting aside funds every month can help you cover these costs when they inevitably arise.   

Review your current financial accounts to see how much money you have available for the upfront costs of buying a home. 

Then review your income and expenses to determine how much you’re comfortable paying each month. As part of this review, calculate your debt-to-income ratio (DTI) by dividing your monthly debt obligations by your pre-tax income. This tells lenders how much of your income is already allocated toward debt payments. A ratio of 36% or less is preferred, but some lenders may be able to work with higher DTIs.

A mortgage affordability calculator can help you determine how much house you can afford based on your finances. 

Saving for a Down Payment and Closing Costs

If your self-review indicates that you’re financially ready to buy a house, you can move forward with your mortgage process and house hunt.

If you’re not financially ready yet, you can create a savings plan to help you reach your goal. This may include:

  • Opening a designated high-yield savings account to keep your savings safe and growing. 
  • Cutting back on unnecessary expenses, so you can save more money.
  • Saving windfalls, like workplace bonuses and tax refunds.
  • Setting up automatic bank transfers to move a set amount from your checking account to your designated savings account each payday so you don’t have to remember to manually do it. 

It may take some time and patience, but over time, you’ll build enough savings to buy a home.

Choosing the Right Mortgage for You

When choosing a mortgage, pay special attention to the following:[4]

  • Mortgage loan type. There are five main types of mortgage loans to explore, each suitable for buyers in different situations. The options can be nuanced, and a mortgage loan officer can help you navigate them to find the best fit for you. 
  • Cost (including the interest rate). Lenders are required to provide a Loan Estimate that outlines the cost of borrowing in a standardized format so you can easily compare multiple offers.[5]
  • Interest rate type. Interest rates can be fixed, meaning that they remain the same over the life of the loan, or variable, meaning that they adjust at regular intervals (after an introductory period) based on market changes. Fixed-rate mortgages provide more predictable payments while adjustable-rate mortgages (ARMs) typically offer lower introductory rates (which may increase thereafter). 
  • Duration. Fixed-rate mortgages may be available in 15, 20, 25, or 30-year terms. ARMs are often 30 years in total with a flat-rate introductory period of 5, 7, or 10 years. Longer durations typically result in lower monthly payments, but higher total costs over the term of the loan. 

Navigating the Mortgage Application Process

The mortgage application process involves having a lender review your finances to confirm that you qualify for a home loan and determine what terms the lender can offer.

Gathering Necessary Documents for Application

Here is a checklist of documents typically needed for a mortgage application:[6]

  • Proof of current income: Pay stubs for the last 30 days for employees or profit and loss statements for those who are self-employed.  
  • Proof of income history: W-2 forms, 1099s, and tax returns from the last two years, plus documentation of any other income sources.
  • Proof of assets: Bank and investment account statements from the last 90 days. 
  • Debt information: A list of current debts, including credit cards, auto loans, student loans, and any other outstanding loans (much of which can be confirmed by the lender during the credit check). 
  • Proof of identity: Your Social Security number and a valid, government-issued ID (such as a passport or driver’s license).
  • Documentation of the source of your down payment: This could be covered by the proof of assets, but if the funds were a gift rather than earned income, you may need a statement from the giver confirming the gift.
  • Documentation of any name change (only needed if the change is recent).

In addition to these documents, the lender may require proof of residence and proof of employment throughout the application process. Lenders also look into your credit history to see how you have handled debt payments to this point.  

Applying for a Home Loan

The home loan application process typically begins with mortgage pre-approval, which should be completed even before your home search begins. Pre-approval is when a lender reviews your financial documents and credit score to determine if you qualify for a loan and how much you may be able to borrow. 

Not only does pre-approval help inform your buying budget, but it can also make your future purchase offer stronger by giving the sellers some assurance that you are likely to qualify for the funding needed to complete the purchase. 

The pre-approval also makes it easier to complete the full home loan approval process once a seller accepts your purchase offer. The lender will already have your information on file, so they’ll just need to confirm that your financial situation has not changed and that the property qualifies for the loan based on its condition and appraised value. 

Closing on Your Home Loan

Before you can close the deal and take possession of your new home, your loan will need to be finalized so the funds can be transferred to the seller on closing day. 

As part of this process, the lender may confirm your employment status, credit score, and financials one final time. As long as everything is in order, they can issue the loan docs, the paperwork you need to review and/or sign to make the mortgage loan official, including:[7]

  • The Closing Disclosure: A form that lists all final terms of your loan, final closing costs, and the details of who pays what at closing.
  • The Initial Escrow Statement: Lists the estimated taxes, insurance premiums, and any other charges the lender expects to pay from your escrow account during the first year of the loan.
  • A promissory note:  A document confirming your promise to repay the loan.
  • Additional documents as required by your state: Many states have required disclosures to protect homebuyers.

Additional documents as required by your lender. Lenders may have additional forms for you to sign, such as a document confirming that you plan to occupy the property (if purchasing a primary residence). 

Loan docs typically need to be signed in the presence of a notary, who confirms your identity and witnesses your signatures. 

Closing on your home loan represents a major step toward completing your home purchase. 

The Bottom Line

Getting a mortgage requires careful financial planning and a fair bit of paperwork, but with a little preparation and organization, you’ll be ready to get your mortgage and buy your new home. Start your journey today by applying for mortgage pre-approval.