Mortgage
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How Does LendingTree Get Paid?

LendingTree is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). LendingTree does not include all lenders, savings products, or loan options available in the marketplace.

The Mortgage Process: A 10-Step Guide

Updated on:
Content was accurate at the time of publication.

The mortgage process is like a job interview — except it’s based entirely on your financial background. Lenders scrutinize your credit history, income, employment and savings experience to see if you meet their guidelines. They review your financial documents like a resume to determine if you’re ready and able to repay your mortgage.

We’ll help you understand each step in the mortgage process to improve the odds that you’re a solid candidate for homeownership.

A little number crunching with a home affordability calculator will give you an idea of how much a lender thinks you can handle. Lenders primarily base your ability to repay a mortgage on your debt-to-income (DTI) ratio, which measures how much of your income is committed to your new mortgage payment along with other monthly debt.

DTI calculations don’t include expenses like family phone plans, gym memberships, car insurance premiums or anything that doesn’t show up on a credit report. Leave some wiggle room in your budget for your lifestyle and throw in a little extra for home maintenance and repairs.

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Check your credit before you get to the next step


Your credit score has a major impact on the interest rate you’re quoted. You’ll need at least a 780 score to qualify for the best conventional mortgage rates. Some loan programs allow scores as low as 500, but you’ll pay a higher rate and have a higher payment, which reduces the loan amount you’ll qualify for.

 Get your free credit score with LendingTree Spring.

If you’re serious about buying a home, the next step is to get a mortgage preapproval. A mortgage preapproval is based primarily on your “credit” profile, which includes your credit, income and savings history. Final approval is based on vetting the home you’re buying.

First, request rate quotes from at least three lenders, and review their loan estimates to see who offers the lowest closing costs at the best rates. You’ll then complete a mortgage loan application, and each lender will vet your credit, income and savings documents.

You’ll typically need to submit:

 One month’s worth of current pay stubs
 Two years’ worth of W-2s or tax returns
 Two month’s worth of bank or asset statements
 Two year’s worth of addresses
 Two year’s worth of employer addresses and contact information

If your financial profile meets the lenders’ requirements, you’ll receive a preapproval letter from each one that confirms the loan amount from your estimate. Pick the best one out of the batch and attach the preapproval letter to the offers you make in the next step.

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Most buyers work with a real estate agent to help them submit an offer on a home and negotiate the price and terms of the purchase. A real estate agent can also advise on the contingencies to include in an offer, like backing out due to a lower-than-expected appraisal or inspection issues.

Keep in mind that your real estate agent can also help you negotiate with the seller to pay some of your mortgage closing costs as part of your contract. Doing so could save you a chunk of change, considering average closing costs range from 2% to 6% of your loan amount.

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What is earnest money?


An earnest money deposit demonstrates to the seller that you’re serious about buying the home, and is usually between 1% and 5% of the purchase price. You’ll likely need to submit earnest money along with your offer.

Once you have an accepted contract, you’ll typically get a home inspection for an in-depth look — from the roof to the foundation — at the home’s condition. You can ask the seller to repair any issues that are discovered or see if they’re willing to cover a portion of your closing costs instead. In the latter case, the money you save can then be put toward repairs.

If the seller isn’t willing to fix anything, you can walk away and get a refund of any upfront earnest money. If the house requires a lot of work before closing, be sure the lock period you choose in Step 5 is long enough to cover any contractor or repair completion delays.

Choosing a mortgage lender is one of the most important steps in the mortgage process. Revisit the lenders you compared in Step 2 and ask them to update rate quotes based on the home you’re buying. The extra effort could help you snag a rate from a lender that wasn’t as competitive your first go-round. Once you choose your lender, request a mortgage rate lock to secure your desired rate — until you do, your rate is “floating,” which means it could change at any time.

After your rate is locked, you’ll receive an updated loan estimate with a lock expiration date — be sure to jot down the date somewhere you’ll remember. If you don’t close by that date, you could end up paying pricey lock extension fees based on a percentage of your loan amount or a daily fee set by the lender.

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A home appraisal is a report completed by a licensed third-party real estate appraiser and is usually completed after you sign off on your home inspection. The appraiser compares your home’s features to nearby, recently sold homes with similar square footage, layouts and amenities. As long as the value is equal to or more than the purchase price you agreed to, you can head to the next step.

If the appraised value is below the sales price, you have three options:

  1. Renegotiate the sales price to match the lower value
  2. Pay the difference at the closing table
  3. Cancel the contract and find another house

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Skipping your appraisal could pay off

If you’re making a big down payment (20% or more) on a conventional loan, you may be eligible for an appraisal waiver. You’ll save $300 to $500 on appraisal costs and speed up the mortgage process.

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How long does a home appraisal take?

Appraisal turnaround times depend on how hot your housing market is. In most cases, it takes at least seven days, but it can be much longer if you’re buying in a competitive area.

This is the “dot the I’s and cross the T’s” part of the mortgage process, and it’s important to pay attention to the following four details so the lender can prepare your loan closing paperwork.

  1. Provide your final documents. This may include your most recent pay stub or bank statement.
  2. Finalize your homeowners insurance. Once you’ve shopped for homeowners insurance, provide the contact information to the lender so they can tie the policy to your mortgage account.
  3. Decide on your title vesting. Title vesting determines what happens to the home if you or a co-borrower dies. Your escrow officer or the attorney handling your transaction can explain the pros and cons of each vesting type.
  4. Don’t change jobs, deposit cash or open new credit. Lenders usually do a final checkup on your employment, assets and credit, and any changes could delay your closing or even result in a loan denial.

Once everything in Step 6 has been signed off on, the lender will issue your closing disclosure — a five-page form that includes details about your loan terms, fees and projected monthly payments. By law, the lender must provide the closing disclosure at least three business days before your closing day to give you time to review it and correct any discrepancies or errors.

Pay close attention to the following details when reviewing your closing disclosure:

 The spelling of your name
 Making sure the loan amount, loan term and loan type match your loan estimate
 The interest rate
 Whether your loan includes prepayment penalties
 Any changes to your closing costs

The attorney or escrow officer handling your closing gives you the final dollar amount you’ll need to pay for any remaining down payment or closing costs. You’ll prepare a cashier’s check or wire funds directly to the escrow account set up for your purchase.

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Watch out for wire fraud


Real estate wire fraud is a multibillion-dollar problem in the U.S., and the scam involves hackers impersonating real estate agents, loan officers or title company employees to trick you into sending them money that is virtually impossible to recoup.

Always verify the wiring instructions with at least two people on the phone (for example, with your loan officer and escrow officer). Never respond by email or text to someone telling you the wiring instructions have changed.

You may sign your paperwork electronically, with a notary or at an escrow company’s or attorney’s office to close on your home. Once the package goes back to the lender, mortgage funds are sent to the escrow company, and everyone involved in the purchase is paid for their services. The title company transfers ownership into your name at the local recorder’s office, and you officially become a homeowner.

Your closing package should include information about where to send your first mortgage payment. Be on the lookout for changes to how and where your payments are made — lenders often sell mortgages to loan servicing companies that handle your future payments.

 Learn more about the closing process and how long it takes to close on a home.

Lender processing is a series of steps lenders take to verify your information and prepare your loan for final review by a mortgage underwriter. A loan processor may take over the mortgage process after your loan officer finalizes your loan terms.

Your loan officer or loan processor should inform you when your loan is approved. Ask your loan officer about their turnaround times — an approval may take days to weeks depending on how busy the lender is or how complex your finances are. Some online lenders have apps that allow you to digitally track your loan status.

Lenders often advertise 24- to 48-hour underwriting turn times, but it may be longer if you have a complex financial situation, such as self-employed income, credit hurdles or property issues.

Yes. Loans backed by the U.S. Department of Veterans Affairs (VA loans), Federal Housing Administration (FHA loans) or U.S. Department of Agriculture (USDA loans) require special government forms. Additionally, an agency-approved appraiser must complete the home appraisal process.

First, find out why the loan was turned down. You may be able to switch lenders, make a larger down payment or pay off some debt to salvage your loan.

Your down payment and closing cost funds are usually paid on closing day. However, you document where the funds are coming from in Step 2 by providing account statements. Deposit gift funds or 401(k) loan proceeds as early in the mortgage process as possible to avoid last-minute delays.

There are a few ways your down payment can impact the loan process, depending on the type of mortgage loan.

For example, if you make a small down payment, you’ll need to qualify for mortgage insurance on an FHA or conventional loan. You should avoid conventional loans if you have a low down payment and credit score, since private mortgage insurance (PMI) premiums are tied to your credit scores. FHA mortgage insurance premiums, on the other hand, aren’t affected by your score.

Mortgage insurance protects your lender against losses if you default, and is added to your monthly payment, loan amount or both. You can avoid PMI with a 20% down payment on a conventional loan, but you’re stuck with FHA mortgage insurance regardless of your down payment.

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