How to Get a Mortgage in 7 Steps

Buying a home is one of life’s greatest achievements—and when all is said and done, you’ll have a place to call your own. Getting there can feel challenging, stressful, and overwhelming. But it doesn’t have to.

Below, we’ll break down the mortgage process into seven manageable steps. By the end, you’ll not only know how to get a mortgage, but also feel empowered as you build your house-buying budget, shop for lenders, and close on your dream home.

Table of Contents

1. Step 1: Assess your financial health
2. Step 2: Explore mortgage options
3. Step 3: Shop for lenders
4. Step 4: Get preapproved
5. Step 5: Submit a formal mortgage application
6. Step 6: Go through underwriting 
7. Step 7: Close on your new home

Step 1: Assess your financial health

Before you can get a mortgage, you need to review your finances to understand how much house you can afford—and if you’re likely to get approved. Here are some things to consider when assessing your financial health before applying for a mortgage:

Your credit score

First and foremost, check your credit score to understand whether you can qualify for traditional financing. Most lenders want to see a credit score of 620 or higher for a conventional mortgage, though you may be able to qualify for a Federal Housing Administration (FHA) loan with a score of 580. The higher your credit score, the better the interest rate you’re likely to be offered.

Is your credit score too low? While it’s technically possible to buy a house with bad credit, you’re better off spending the next six months to a year repairing your credit by making on-time payments and reducing your credit utilization. You can also dispute any errors on your credit report. When your credit score has improved, you can start shopping again.

Your debt-to-income ratio

Lenders will also look at your debt-to-income (DTI) ratio—a measure of your monthly debt obligations compared to your monthly income. Though DTI requirements for mortgages can vary, most lenders want to see a DTI of 36% or less.

If your DTI is too high, wait to apply for a mortgage. You can reduce your DTI by paying down your debts, such as credit cards and student loans. (Bonus: This will also improve your credit score.) You can also try to add a new, reliable income stream to reduce your DTI.

Additional factors

Lenders will consider additional factors when determining whether to lend to you, and at what rate, including:

• Your savings and assets
• Your employment history
• The size of your down payment

Your budget

Finally, during your financial health assessment, review your budget to determine how much you’re comfortable spending, both for a down payment and for your recurring monthly payment.

Use a mortgage calculator to see how much the cost of a house (and property taxes and homeowners insurance) will impact your monthly payment. Never buy a house that will yield a monthly payment you would struggle to make with your current budget—and leave wiggle room in your budget for property tax and homeowners insurance increases in future years.

When speaking with clients looking to get their first mortgage, most of our discussions center around how much of a down payment to put down and how to find the best interest rate. How much of a down payment to put down will often depend on two things:

How much of a monthly mortgage payment would you be comfortable with? How long do you plan to stay in the home? 

If you prefer a lower monthly payment, you must put down more upfront cash. If you don’t plan to stay in the home long-term, you may prefer to put down less cash and invest those funds elsewhere for growth over the long term. 

Step 2: Explore mortgage options

As a borrower, you may have access to more than one type of mortgage. Consider your options carefully to get the best mortgage for your budget.

Common mortgage types

These are some of the most common types of mortgages:

• Conventional mortgage: This is the most popular type of mortgage. Because conventional loans are not backed by the government, you’ll need a stronger credit score to qualify, and you’ll have to make a larger down payment. Interest rates tend to be lower if you have good credit.
• FHA loan: The Federal Housing Administration (FHA) backs these loans for first-time home buyers, low-income families with sub-par credit, and home buyers with disabilities. Credit score requirements for FHA loans can be as low as 580, and lenders may only require 3.5% of the total house cost as a down payment.
• VA loan: Active-duty and veteran service members can get a VA loan, backed by the Department of Veterans Affairs. These loans typically don’t require a down payment or private mortgage insurance (PMI) and can have more favorable interest rates than conventional loans.
• Jumbo loans: If you have your eyes on an expensive house, you may need a jumbo loan to make it happen. That’s because the Federal Housing Finance Agency sets lending limits for conventional mortgages; house prices that exceed those limits require these specialized loans, which have stricter credit score requirements and higher interest rates.

Interest rates

Beyond the type of mortgage, you may also have a say in the structure of the interest rate. Some mortgages have fixed interest rates; others have adjustable rates.

• Fixed-rate mortgage: With a fixed-rate mortgage, the interest rate you’re offered at the start of the loan stays the same over the life of your loan, unless you refinance the mortgage.
• Adjustable-rate mortgage: With an adjustable-rate mortgage, the interest rate can fluctuate over time. Adjustable rates typically start lower than fixed rates but eventually grow larger; adjustable rates can make sense if you only plan to live in the home for a short amount of time. 

Loan terms

Finally, you can select a loan term—the length of time during which you’ll repay your mortgage. A 30-year mortgage is the most common, but you can shorten the repayment period to 15 or even 10 years.

Shorter loan repayment terms result in higher monthly payments, but you’ll spend significantly less in interest over the life of the loan.

I often discuss the concept of a 15 vs. 30-year mortgage. It is true that a 15-year mortgage will lead to paying less in interest, but taking out a 30-year and paying it as if it is a 15-year can be helpful in the event of future financial stresses rather than locking in the higher payments of a 15-year mortgage.

Step 3: Shop for lenders

Shopping around for lenders is a crucial step. Your real estate agent will likely recommend a lender, but you’re free to consider others to try to get the lowest rates and fees.

You can start the search with your personal bank or credit union, as well as other local financial institutions. Online loan marketplaces, including LendingTree, offer a convenient way to compare multiple lenders in one spot to see which have the lowest rates and fees. Some lenders may also offer special discounts and promotions; ask about these before making a decision.

You should also review a lender’s ratings on sites like Better Business Bureau and Trustpilot, and look at their mobile app and online platform to see how easy it is to use before settling on a lender.

Finding a broker that can help you search a wide array of lenders is very helpful. The broker can do the heavy lifting of finding the best rate and helping you lock that in. 

Step 4: Get preapproved

In a competitive market, sellers need to know you’re serious when you make an offer on a house. The best way to do this is to include a preapproval letter from your lender, indicating that you’re preapproved to finance up to a certain dollar amount on a home purchase.

To get preapproved, a lender will thoroughly review your financial situation, including a credit pull and an analysis of several key documents that detail your assets and liabilities, including:

• Proof of income and employment (pay stubs, W-2s, 1099s, tax returns)
• Proof of assets (bank statements, retirement account statements)
• Identification (driver’s license, passport)

Depending on your financial situation, you may need to provide additional documentation, such as a down payment gift letter, loan statements, or disability benefit statements.

After the lender has reviewed your credit and documentation, they will issue you a preapproval letter (assuming you meet their requirements). This letter does not guarantee you a loan, but it’s a strong indicator that you’re a qualified buyer.

Preapproval vs. prequalification

Sometimes, people use preapproval and prequalification interchangeably, but they don’t mean the same thing.

Prequalification is not as accurate as a preapproval, because it doesn’t require a hard credit pull or a deeper analysis of your income and assets. A prequalification may simply help you understand how much home you can afford.

To successfully make an offer on a house, you’ll likely need a preapproval letter. Ensure you have one of these ready before you start seriously shopping for homes.

Step 5: Submit a formal mortgage application

Arguably, the most fun part of the process comes next: shopping for your dream home. But once you find it, you still have to make an offer—and have it accepted. If the offer is accepted, move forward with a formal mortgage application swiftly.

Your lender may have most of the documentation needed to approve the loan from the preapproval process, but if some time has passed, you may need to provide updated pay stubs and other documentation. Within three days, the lender will send you a loan estimate, with the total loan cost, including fees and closing costs, as well as the interest rate.

If you choose to move forward, the lender will send your application to underwriting.

Step 6: Go through underwriting 

During underwriting, the lender will more carefully review your financial documents and credit report to ensure you’re a qualified borrower. They’ll also order an appraisal to ensure the house is worth what you’re offering. This process could take a few days to a few weeks; 30 to 45 days is common from offer to closing.

During the underwriting process, it’s crucial that you don’t make any major financial changes. Don’t open a new line of credit, switch jobs, or make any big purchases; this could jeopardize your loan approval.

While the lender is completing this process, you’ll need to purchase homeowners insurance and order a home inspection. If anything bad turns up on the inspection, you may need to renegotiate with the sellers to have them address the issues or lower the asking price. You may also walk away following a bad home inspection if you prefer.

Step 7: Close on your new home

At least three days before closing, you’ll also receive a closing disclosure with details about your loan. Compare this against your loan estimate to ensure it’s similar.

Before you can close on your home and walk away with the keys, you’ll need to complete a final walkthrough shortly before closing to ensure the property is in the same condition it was when you made the offer (and all the agreed-upon appliances and furniture are still present).

Assuming everything is good, you can attend your closing, sign the paperwork, and wire the money to your lender for the down payment and any other fees. Once you’ve signed on the final dotted line, the house is yours. Congratulations, you’re a homeowner!