You've decided on your dream home and the type of mortgage you’re seeking, now you're ready for the next step: applying for a mortgage loan. However, before you can submit a loan application and buy a home, there's a good bit of preparation to be done.
Before applying for a mortgage loan, it’s helpful to start by gathering the appropriate paperwork (personal information, federal tax returns, bank statements, etc.). You’ll also want to check your credit report, and depending on where it ranks, raise your credit score. Raising your credit score can lower your mortgage rate significantly, saving you thousands of dollars over the life of the loan.
From there, you can research and compare several different lenders to look for the best mortgage rates available to you, and then get preapproved to borrow at a specific loan amount.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Here's what to expect when applying for a mortgage loan, including key things to keep in mind when going through the application process.
Filling out a mortgage loan application
You’ll probably fill out a lender’s application online, and then talk with a loan officer by telephone. This is where the folder of financial information you’ve collected will come in handy. When filling out the application, you’ll need to provide borrower, property, employment and expense information.
Be prepared to give the name and phone number of someone who can verify financial information about you — most likely, your employer's personnel office. If you have substantial income from investments, you'll be asked to substantiate this through account statements and possibly an accountant, stockbroker, trust officer or similar source.
If you are self-employed or if 25% or more of your income is from commissions or bonuses, you must provide two years of tax returns to offer proof of established income. Self-employed people may also need a profit-and-loss statement so the lender can assess your company’s strength.
To begin processing of your application the lender may require a fee of $100 to $400 that covers the cost of pulling your credit report and obtaining an appraisal of the property's market value. The fees are non-refundable in most cases.
Review loan estimates
Once the lender has received your application, it will issue you a good faith estimate (GFE), which is mandated by the federal Real Estate Settlement Procedure Act (RESPA). Once you've obtained lenders' GFEs, you can compare their rates, closing costs and terms in an apples-to-apples format.
Check whether the quoted interest rate is guaranteed, and for how long. If you think that interest rates may rise while your application is being processed, ask for a "lock-in." Get it in writing.
Some lenders may offer a lock with a float-down option, meaning that if the rate goes down by a certain amount before you close, you will get the lower rate.
Loan processing and decision
Here's where you'll need to be patient. The mortgage lender will now process your mortgage application, reviewing its accuracy. During this time, you may be asked to provide additional documentation and answer any further questions.
Closing
Closing costs vary depending on where you live: They can be anywhere from 2% to 3% of a home’s purchase price and up to 5% to 6% in high-tax areas. They include a plethora of charges, including any discount points that you’ve agreed to pay to lower your interest rate; an origination fee of 1% to 1.5% of the loan amount; costs for an appraisal, survey, title search, title insurance, recording of deeds and mortgages, transfer tax and attorney's fees; and an estimated calculation of monthly costs for property taxes and hazard insurance if your lender will collect the funds and pay them from an escrow account.
Use the tools below — powered by Bankrate — to compare mortgage rates today.
Related Content
-
The Most Popular Apps for Retirement Planning in 2025A J.D. Power survey ranks retirement planning apps based on customer service and satisfaction. Does your financial app make the cut?
-
Don't Disinherit Your Grandchildren: The Hidden Risks of Retirement Account Beneficiary FormsStandard retirement account beneficiary forms may not be flexible enough to ensure your money passes to family members according to your wishes. Naming a trust as the contingent beneficiary can help avoid these issues. Here's how.
-
Can You Afford a Million-Dollar Home on a $250,000 Salary?It’s more than the sticker price — mortgage rates, down payments, taxes and debt all factor into whether a million-dollar home fits your budget.
-
Why a Landmark Real Estate Commission Settlement Hasn’t Lowered Costs for HomebuyersThe 2024 NAR settlement promised commission transparency and negotiation —but one year later, average fees remain unchanged. See why change has been slow and what it means for homebuyers and sellers.
-
Lock or Float? How to Decide on Your Mortgage RateMortgage rates move daily, here’s how to know if you should lock in a rate now or let it float until closing.
-
The Role of a Mortgage Underwriter in Buying a HomeFrom fast-track approvals to manual reviews, here’s what to expect (and how to avoid delays) in the underwriting process.
-
My Mortgage Rate is 6.5%. Should I Refinance If Rates Fall By Half a PointA half-point dip may not be enough to offset closing costs. Here's the magic number that makes refinancing pay off.
-
How Home Appraisals Work — and What the Final Value MeansFrom comps to contingencies, here’s what a home appraisal reveals about your property’s true worth.
-
Should You Sell Your House Now or Wait? What to ConsiderWith rates holding steady and market shifts ahead, here's how to decide whether to list your house or wait.
-
The 28% Rule for Housing: Does It Still Work in Today’s Market?Rising home prices and stubborn mortgage rates put this long-standing rule to the test.
