Back To Basics: Applying For A Mortgage

Despite just how many Americans either already have, or plan to get, a mortgage, the specifics of this loan type are often underexplained and misunderstood. In fact, many would-be homebuyers largely start the process with a casual search of the property market in their preferred area — rather than interrogating the financial side of things. While it's reasonable to look at homes before you consider mortgage options, once you get a bit more serious about the hunt it's a good idea to shift gears.

At its core, a mortgage is a loan typically aimed at financing the purchase of a home. These can be issued by your local bank or credit union. However, for those with specific needs, online non-bank lenders or specialty outlets can support mortgage products like VA loans or jumbo mortgages. It's important to realize that these loan types tend to be organized in either 15- or 30-year repayment terms, so having an idea of which you prefer ahead of time can help with the process. 

One of the most important things to keep in mind is that, as a buyer, you will likely need to fund a down payment on whatever home you are looking to purchase. First-time homebuyers averaged a 9% down payment, based on 2024 figures from the National Association of Realtors. From there, your mortgage would essentially cover the rest of the purchase amount. However, applying for a mortgage can often feel like jumping through dozens of hoops thanks to the paperwork, questions, and clarifications that come with the process. While this can feel overwhelming and complex, demystifying the process can help get you into your dream home faster.

You'll need several documents to move forward with a mortgage application, including W-2s or 1099s for the last two or more years, your banking and credit statements, and other personal information. Generally you'll need to provide two to three months worth of banking documentation, but self-employed applicants may need to provide more, depending on the lender. All of this paperwork, along with your estimated budget and down payment amount, is assembled as part of your overall application for a lender to review.

Due to how long the application process can take (up to two months for a typical applicant), would-be homebuyers might decide to move forward with something known as a mortgage pre-approval. This is essentially the same process as a full mortgage application, minus having a specific property in mind yet, with a pre-approval offer usually valid for around 90 days. Pre-approval can provide a clear hard cap from the bank on just how much you can realistically offer on a home. There are a lot of things that first-time homebuyers get wrong, and pre-approval can help avoid many of them.

Speaking with your real estate agent or Realtor about mortgage options can also be helpful. Since these professionals work with banks every day, they can be a resource when shopping around for a lender. On that note, buyers should apply with at least three to five different mortgage lenders in order to have a competitive selection of choices when considering things like interest rates. That said, aim to make these inquiries within a maximum of 45 days in order to avoid hurting your credit score due to multiple hard pulls on your credit report.

Once you find a home that matches your budget and desires, you would formally put in an offer. This means telling the owner that you want to buy the home, and what price you're willing to pay for it. With pre-approval, you can back up this initial offer with documentation that shows you already have the funding necessary for the purchase. This can be especially helpful if there are competing offers on the home for the owner to consider. At this point, a seller might negotiate with you or accept your offer outright. At this stage, you'll also need to hammer out details about closing timelines and any repairs or alterations you might desire after a home inspection.

Once you've come to an agreement, it's time to return to the financial side of things to apply for a full mortgage loan (either by starting fresh or changing your pre-approval letter into the real deal). With a signed purchase agreement, you'll return to your lender with the specifics of the home and your offer. At this point, you would provide any updated documents that might be necessary — or submit the entire packet if you don't already have a pre-approval agreement — before moving on to underwriting. 

Underwriting is the process of verifying all of your details and ensuring you're actually eligible for the mortgage loan in which you've applied for. This often includes a back-and-forth with the bank/your lender (which can last several weeks) as they ask specific questions about your financial status and history. If all goes well, you would then close on the property, sign the mortgage agreement, and get the keys to your new home.