Before most house hunters can close the deal, they need to qualify for a mortgage. Learning how to apply for a mortgage in advance — and breaking the process down into digestible steps — can help applicants feel better prepared and avoid any unpleasant surprises during the process. (Good news: The mortgage application process is one of those things that is more complicated to explain than to experience!)
Ready to learn how to apply for a home loan? Here are the seven steps in the mortgage process, including moves you can make that may expedite your approval.
Table of Contents
Table of Contents
Key Points
• The mortgage process involves seven steps, starting with submitting your application and choosing a loan type.
• Scheduling a home inspection and appraisal is crucial for determining the property’s condition and value.
• Securing homeowners insurance is required before closing, and the lender will require insurance before closing.
• The loan processing and underwriting phase typically takes about 50 days, during which you should avoid taking on new debt.
• The process concludes with receiving your approval, reviewing the closing disclosure, conducting a final walk-through, and attending the closing meeting.
1. Submit Your Mortgage Application
You’ve found the ideal property, made an offer on the house, and put your down payment into escrow. If you didn’t already get preapproved for a mortgage online, it’s time to apply for a mortgage. There are many different mortgage types, and choosing one will depend on your income, down payment, location, financial approach, and lifestyle. Some choices you’ll need to make at this stage of the mortgage process are:
• A conventional home loan or a government-insured loan, such as an FHA loan backed by the Federal Housing Administration or a VA loan backed by the U.S. Department of Veterans Affairs)
• A fixed-rate or an adjustable-rate mortgage
• Your repayment term: typically 15, 20, or 30 years
A good lender will walk you through your options, whether you’re looking at a home requiring an FHA mortgage or a high-priced home with a jumbo loan.
Your lender will have the required forms for your mortgage loan application, and you can often submit everything online, but you’ll want to have the following at hand:
• Proof of identity.
• Documentation of income: W-2s or 1099s, your most recent income tax filing, profit-and-loss statements if self-employed, pay stubs, Social Security and retirement account info, information on alimony and child support, etc.
• Documentation of assets: bank accounts, real estate, investment accounts, etc. If you received help from a family member to fund your down payment, a gift letter will be necessary.
• Documentation of debts: any current mortgage you might have, car loans, credit cards, student loans, etc.
• Information on property: street address, sale price, property size, property taxes, etc.
• Employment documentation: current employer information, salary information, position/title, length of time at employer, etc. In general, lenders like to see two years of employment on a loan application. Self-employed individuals will generally submit two years of tax returns.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
2. Schedule Your Home Inspection and Appraisal
It can take a little time to get your inspection and appraisal on the calendar, and then you can expect to wait at least a few days to get the reports. So now’s the time to make sure these two important aspects of the home-buying process are moving along.
A home inspection may not be required, but it’s a good idea to hire an inspector (your real estate agent may have recommendations, but you can shop around) to thoroughly check the property inside and out for undisclosed problems. If the inspector uncovers expensive issues, you may negotiate for a price reduction, which could affect your mortgage principal amount. If the problem is a dealbreaker, the inspector’s report could help you back out of the deal without penalty.
Review this home inspection checklist to make sure your inspector will cover all the bases. In some cases, a general home inspector may find an issue that requires a more specific expert to take a look (and yes, that’ll cost more money — but it may be worth the cost).
Don’t let the infatuation with a seemingly perfect property blind you. If there are serious issues that come up during the inspection and the sellers won’t budge on price (or agree to fix them before closing), seriously consider walking away. You won’t recoup the money you paid for the inspection — a home inspection costs between $300 and $500 — but if it keeps you from investing in a money pit, it’s money well spent.
An appraisal will be necessary as part of the mortgage underwriting process. It’s an independent evaluation of a home’s value. It will describe the property and what makes it valuable. Factors that affect the appraisal value include the location, condition, amenities and features, and market conditions in the area.
A lender requires a home appraisal to ensure that it isn’t lending more than the property is worth. If the appraisal comes in too low, the lender won’t lend extra money to cover the gap. Buyers will need to cover the difference with their own money or renegotiate the price with the seller to match the appraisal.
Recommended: Local Housing Market Trends
3. Secure Homeowners Insurance
You’ll need to buy homeowners insurance before you can close on your new home, so now’s the time to scout around for a policy that provides the coverage you need at the price you feel is right. Thanks to the appraisal, you can feel confident in the value of the home, which will help in the insurance process.
Before you commit, get quotes from a few different companies. Taking the time to do so at this step of the mortgage process will ensure your coverage is shipshape when you reach your closing. Your prospective lender will want to know the home is covered and many homeowners make their insurance premium payments as part of their monthly mortgage bill.
4. Undergo Loan Processing and Review
While you are taking care of your insurance coverage, the lender will be processing and reviewing your loan application to make sure you meet all the mortgage loan requirements. A major part of the mortgage loan process is the underwriting phase. The underwriting process begins after you complete your mortgage application, ends after all the documentation has been completed, and includes the appraisal.
During the process, the underwriter examines the borrower’s financials, as well as the appraisal, title search, and proof of homeowners insurance. The lender will perform a hard credit inquiry. In general, the better your credit score, the better the mortgage rate you’ll be approved for. If your score is above 740, you’ll qualify for the best rates. But in general, you’ll need a minimum 620 credit score to buy a house. Lenders are required to do a second credit check before final mortgage loan approval and may likely ask for further documentation.
The average time between submitting a mortgage application and closing is about 50 days, so if you’re wondering how long does the underwriting process take for a mortgage, you can expect things to take a little under two months, start to finish. During this period, it’s wise to observe a self-imposed “credit freeze.” That is, don’t run up your credit cards beyond what you usually spend each month. Put off major purchases. Don’t apply for new credit cards, take out auto loans, or take on any other new debt. And, of course, make sure to pay all your bills on time. If there’s any significant change in your credit history, your closing may be delayed or even derailed. Should something major come up (like an expensive medical emergency), call your lender to let it know.
Responding quickly to any questions or requests from your lender can help keep your application on track.
Recommended: What’s the Difference Between a Hard and Soft Credit Inquiry?
5. Receive Your Approval and Closing Disclosure
It can be tough feeling like your life is on hold while you’re waiting for the mortgage underwriting process to be completed. Try to be patient and let things play out. Now is a good time to reach out to friends and family who have been through the mortgage loan process before and commiserate. Consider this your orientation into the homeownership club.
Once the appraisal is complete and all documentation has been reviewed and verified, the underwriter will complete the mortgage underwriting process and recommend approval, denial, or pending. A pending decision is given when information is incomplete. You may still be able to get the loan by providing the documentation asked for.
It’s a happy day when your lender officially notifies you that you have been approved for your home loan. After underwriting approval with a “clear to close,” you’re set to close on your loan. The mortgage closing disclosure you receive from the lender is a required document. This five-page form from your lender will outline the home mortgage loan terms, including the loan principal, interest rate, and estimated monthly payment. It also lays out how much money is owed for closing costs and the down payment.
Lenders are required by federal law to provide the mortgage closing disclosure at least three business days ahead of the closing date. Make sure you read it immediately and thoroughly.
6. Do A Final Walk-Through of the Home
Before arriving at closing, you’ll want to do a final walk-through of the property you’re purchasing. During this walk-through, confirm that the sellers have made any repairs that were agreed to — and that they haven’t removed anything, such as an appliance or light fixture, that was meant to be left, per the purchase agreement.
7. Attend the Closing Meeting
Closing day comes after the mortgage loan approval process is completed. All parties will sign the final documents and ownership is legally transferred from the sellers. In the days prior to your close, the lender should provide a final list of closing costs. Closing costs are typically 2% to 5% of the mortgage principal and may include items like:
• Lender fees
• Appraisal and survey fees
• Title search/title insurance fees
• Recording fees
• First year of private mortgage insurance (PMI) premiums, if required
You can pay closing costs by wire transfer a day or two before, or by cashier’s check or certified check the day of closing.
In the past, buyers and sellers, their agents, and lawyers would gather in the same room to sign the paperwork at closing. In recent years, remote online closings have become more common. The closing may be virtual, but the feelings of relief and happiness that typically result are very real.
The Takeaway
Applying for and securing a home mortgage loan follows a simple process that can seem complicated the first time you do it. But if you reply to questions promptly and are organized with your documents, it’s actually pretty simple — even if it does involve a little waiting time.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
How long is a mortgage loan in processing?
It takes a little under two months from the date you submit your mortgage application to closing on the house — the average timeline is about 50 days. In some scenarios, you may be able to close in as little as 30 days.
How do you know when your mortgage loan is approved?
Your mortgage loan officer will contact you when your loan is approved. They may call you to give you the good news, but you’ll want to see it in writing so watch for an email as well.
What should I avoid after applying for a mortgage?
You want to keep your financial situation as stable as possible during the mortgage application process. That means don’t open new credit accounts, and keep your credit utilization down (no extra swipes on those credit cards). Don’t fall behind on any bill, either
What looks bad on a mortgage application?
Key red flags on a mortgage application include a high level of debt relative to your income, a low credit score, or a history of late or missed debt payments. A lender might also be concerned about any large, unexplained influx of cash into your bank account in the months leading up to your application. A history of gambling or repeated use of payday loans might also be cause for concern from a lender’s perspective.
Photo credit: iStock/MicroStockHub
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
¹FHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency. †Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs. VA loans are subject to unique terms and conditions established by VA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. VA loans typically require a one-time funding fee except as may be exempted by VA guidelines. The fee may be financed or paid at closing. The amount of the fee depends on the type of loan, the total amount of the loan, and, depending on loan type, prior use of VA eligibility and down payment amount. The VA funding fee is typically non-refundable. SoFi is not affiliated with any government agency. Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
Checking Your Rates: To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.
SOHL-Q425-196