What Is the Process of Applying for a Mortgage?

Applying for a mortgage follows the same order with almost every lender: check your credit and budget, get preapproved, compare Loan Estimates from several lenders, choose one and submit the full application, lock your rate, get through underwriting and the appraisal, and close. Federal rules give you two fixed dates along the way: the lender must send a Loan Estimate within 3 business days of receiving your application, and you must receive the Closing Disclosure at least 3 business days before you close. Freddie Mac puts the average time to close a purchase loan at 43 days.

Step 1: Check your credit and set a budget

• Pull your credit reports for free at annualcreditreport.com and dispute any errors with each credit bureau. The Consumer Financial Protection Bureau (CFPB) says correcting errors can raise your scores in 30 days or less, and a higher score generally means lower rates and more lenders to choose from.
• Set a monthly payment you can carry, including property taxes, homeowners insurance, mortgage insurance, and any association dues. A lender's approval amount can exceed what fits your budget, so set this number yourself before you talk to lenders.
• Decide on a down payment and loan type. The amount you put down affects your rate and whether you pay mortgage insurance. What a mortgage is and how it works explains the payment and the loan documents.

Step 2: Get preapproved

A preapproval letter states how much a lender is generally willing to lend you, so you can show a seller you are likely to get financing. Lenders use "prequalification" and "preapproval" differently: some issue a letter based on what you tell them, and others verify your income and assets first. Either way, the CFPB says the letter is not a guaranteed loan offer, and the lender may check your credit to issue it.

Ask a real estate agent or a housing counselor whether sellers in your area expect a verified preapproval. How to get preapproved covers what lenders review.

Step 3: Shop lenders and apply

You have applied, for federal disclosure purposes, once you give a lender six pieces of information: your name, income, Social Security number (for the credit check), the property address, an estimate of the property's value, and the loan amount you want. From there:

1. The lender sends a Loan Estimate within 3 business days. It is a standard 3-page form showing the rate, monthly payment, and closing costs. Until you receive it and tell the lender you want to proceed, the lender may charge only a reasonable credit report fee.
2. Get Loan Estimates from at least three lenders, as the CFPB recommends, ideally on the same day for the same loan amount and type. Where to get a mortgage lists the kinds of lenders to ask, and what to look for in a mortgage shows how to compare the forms line by line.
3. Keep the shopping window short. Most credit scoring models count several mortgage credit checks within a 14- to 45-day period as about one inquiry. Finishing within 14 days stays inside the shortest window.
4. Tell the lender you choose that you intend to proceed. Only then can it charge an application fee, an appraisal fee, or most other fees. The lender has to honor the fees on the Loan Estimate for 10 business days, so a delay can mean a new estimate.
5. Send your documents. The CFPB's checklist includes pay stubs for the last 30 days, W-2s and signed federal tax returns for the last two years, your two most recent bank statements, proof of the down payment source (including a signed gift letter for gifted money), and a photo ID. What documents you need covers self-employed and other income.

Receiving a Loan Estimate is not approval, and you are not committed to any lender until you sign the closing documents.

Step 4: Lock your rate

A rate lock holds your interest rate for a set period, usually 30, 45, or 60 days. The top of page 1 of the Loan Estimate shows whether your rate is locked and until when. Ask the lender these questions before you lock:

• How long is the lock, and what does a longer one cost?
• What does an extension cost if closing is delayed?
• What could still change the rate?

A lock does not protect you from changes to your own file. The rate can still move if your loan amount, credit score, or verified income changes, or if the appraisal comes in higher or lower than expected.

Step 5: Underwriting and appraisal

Underwriting is the lender's check that you meet its rules. The underwriter verifies your income, assets, and debts and may ask for updated pay stubs or bank statements, sometimes more than once. The CFPB advises against applying for credit cards, car loans, or other new credit during this period, because each application can lower your scores.

At the same time, the lender orders an appraisal, an independent estimate of the home's value. Freddie Mac says the appraisal process can take up to two weeks. The lender must deliver a free copy of the appraisal to you promptly once it is complete, or at least 3 business days before closing, whichever comes first, although you can still be charged for the appraisal itself. You can generally waive advance delivery by notifying the lender at least 3 business days before closing; the lender must then deliver the copy at or before closing.

If something in your file changes, such as a low appraisal, a new debt, or income the lender cannot document, the lender sends a revised Loan Estimate. How mortgage approval works covers conditional approval and what underwriters ask for.

Step 6: Review the Closing Disclosure and close

Once the loan is approved, the lender sends the Closing Disclosure, a 5-page form with your final terms and cash to close, which has to reach you 3 or more business days before the closing date. Compare it with your last Loan Estimate and ask the lender about any change. A new 3-business-day wait starts if:

• the APR (the yearly cost of the loan including interest and certain fees) changes enough to make the disclosed APR inaccurate under federal rules,
• the loan product changes, such as from a fixed rate to an adjustable rate, or
• a prepayment penalty is added.

If a lower interest rate leaves the previously disclosed APR and finance charge (interest and certain loan fees) overstated, the APR remains legally accurate and no new wait is required. The lender must still deliver a corrected Closing Disclosure at or before closing.

Closing also cannot happen until at least 7 business days after the lender delivered your first Loan Estimate.

On closing day, you sign the promissory note and the mortgage or deed of trust and pay your down payment and closing costs. Freddie Mac recommends a final walk-through of the home about 24 hours before closing and says to bring a state-issued photo ID, proof of homeowners insurance, and a cashier's check or wire transfer for the funds due. Depending on your state, a settlement agent, an escrow agent, or an attorney runs the closing.

How long does the whole process take?

Delays often trace to your file: a missing document, an appraisal that comes in low, or a change in income or debts, any of which can also bring a revised Loan Estimate. Choose a rate lock that covers your contract's closing date with a few days to spare, so a short delay does not mean paying for an extension.