If you have never bought a home, the mortgage approval process can seem mysterious. You hand over a stack of documents, and weeks later you are approved, or so the story goes. In reality, each stage has a clear purpose. Once you understand what the lender is looking for, the process feels far more manageable.
Your credit is one of the first things a lender evaluates. It helps them gauge how you have managed debt in the past. Generally, a higher score can lead to more loan options and better terms. Check your credit reports before you apply, dispute any errors and keep paying every bill on time.
Having paperwork ready speeds everything up. Most lenders will ask for some combination of:
Create a folder, paper or digital, and keep it up to date.
These terms sound alike but are different steps.
Pre-qualification is an early estimate of how much you may be able to borrow, based on information you share. It is quick and helpful for planning.
Pre-approval goes further. The lender reviews your credit and key documents and issues a letter stating how much you may qualify for, subject to final conditions. Sellers take pre-approved buyers more seriously, which can give you an edge when negotiating.
Around this time, you and your loan officer will talk through loan types. A fixed-rate mortgage keeps the same rate and principal and interest payment for the life of the loan. An adjustable-rate mortgage may start lower but can change after an initial period. You will also weigh programs like conventional, FHA and VA. Our loan comparison page is a helpful overview.
Ask your loan officer to explain your Loan Estimate once you apply. This standard form lists your projected rate, payment and closing costs, and it makes comparing options much easier.
Once you have a signed purchase contract, your full application goes to underwriting. An underwriter verifies your income, assets, debts and credit, and confirms the home meets the loan’s requirements. An appraisal is ordered to make sure the property’s value supports the price.
It is normal for underwriters to request additional items, often called conditions. These might include an updated bank statement or a short letter explaining a deposit. Respond quickly and completely to keep things moving. Meanwhile, avoid new debt, large purchases or job changes, since your lender will typically recheck your credit and employment before closing.
When all conditions are satisfied, you receive the clear to close. You will get a Closing Disclosure at least three business days before closing that shows your final loan terms and costs. Compare it with your Loan Estimate and ask about anything that changed.
Before closing, you will also do a final walk-through of the home to confirm it is in the condition you agreed on and that any negotiated repairs were completed. You will need to arrange homeowners insurance as well, and your lender will want proof of coverage.
At closing, you will sign your loan documents, pay your remaining down payment and closing costs, and receive the keys. Take your time reading, and do not hesitate to ask questions. It is your loan, and you deserve to understand every page.
The process is much easier with an experienced guide. Visit our first-time home buyer page for more, or connect with a FLO Mortgage loan officer who can walk you through each step.
A FLO Mortgage loan officer can walk through your options, run real numbers and help you choose a loan that fits.
This article is for general education and is not a commitment to lend. All loans are subject to credit approval, underwriting guidelines and program availability. FLO Mortgage, Company NMLS #1835856. Equal Housing Opportunity.
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