How to Get a Mortgage: 7 Steps to Your New Home

Understanding how to get a mortgage is an important part of the homebuying process. It involves assessing your financial health, researching current mortgage rates and getting preapproved, among other things. These set the foundation for the rest of your journey toward homeownership.

Getting a mortgage doesn't have to be overwhelming — following a straightforward process and understanding each step can help you secure the loan that meets your needs. We'll walk you through the seven steps to getting a mortgage, ensuring you're informed and ready as you begin your homebuying journey.

Key Takeaways

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Mortgage rates are influenced by factors like your credit score and down payment amount, with better rates offered to those with stronger financial profiles.

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Using a mortgage calculator helps you estimate monthly payments and factor in costs like taxes and insurance, giving you a clearer picture of your budget.

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Homebuying rules, such as dual agency or requiring a real estate attorney, vary by state and can impact your mortgage process and closing experience.

Step 1: Assess Your Financial Health

The first step to getting a mortgage is assessing your financial health. This helps you understand what you can afford and what lenders will expect from you.

  • Review savings for a down payment: Lenders typically expect 3-20% of the home price upfront. A larger down payment lowers your monthly payments and reduces the amount you need to borrow.

  • Consider extra savings for closing costs: Closing costs, which usually range from 2-5% of the loan amount, cover fees for appraisals, inspections and legal services. It’s essential to set aside additional funds to cover them.

  • Check your credit score: A score of 620 or higher is often needed for most loans. A higher score can qualify you for better mortgage rates, saving you thousands.

  • Calculate your debt-to-income (DTI) ratio: Lenders prefer a DTI below 43%, meaning less than 43% of your income should go toward debt payments. A lower DTI improves your chances of getting approved for a loan.

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Debt-to-Income Ratio Calculator

Provide your income and recurring payments to calculate your DTI.

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Step 2: Understand Current Mortgage Rates

Several factors influence current mortgage rates, including your credit score, down payment and loan term. Rates can also vary by state, so knowing what to expect is important. Use the interactive table below to see average APRs in your area based on these variables and see what you could qualify for.

Data filtered by:Results filtered by:
State:
State:Alabama
Loan Type:
Loan Type:30-year Fixed
Credit Score Range:
Credit Score Range:680 - 740
Down Payment:
Down Payment:5% to 20%
6.15%6.69%

Mortgage rates fluctuate daily or weekly based on market conditions. By monitoring trends, you can decide when to secure a mortgage rate lock, which freezes your rate for a set period. Locking in at the right time can help you avoid paying more if rates rise before your loan closes.

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INTEREST RATE VS. APR: WHICH MATTERS MORE FOR YOUR MORTGAGE?

When you get a mortgage, it’s important to understand the difference between the interest rate and the Annual Percentage Rate (APR). The interest rate is what you pay to borrow the money, while the APR includes the interest plus additional fees and costs. These include origination fees, closing costs, discount points and mortgage insurance. By looking at the APR, you get a clearer picture of the loan’s true cost, making comparing offers from different lenders easier.

Step 3: Learn State-Specific Homebuying Rules

When learning how to get a mortgage, it is important to know that homebuying regulations vary by state. For instance, dual agency is not allowed when buying a home in Texas, meaning an agent cannot represent both the buyer and seller. In New York, dual agency is legal, but it requires written consent from both parties.

Another area where states differ is the role of real estate attorneys. A licensed attorney needs to oversee the closing process when you purchase a home in Georgia. In Florida, you don't need an attorney at closing, although many buyers still choose to hire one to review contracts and manage legal details.

These differences can impact how your homebuying process unfolds. Knowing local regulations can help you avoid surprises and ensure a smoother transaction.

Step 4: Determine How Much You Can Afford

Set a realistic budget based on your financial health and the local housing market to determine how much you can afford. It's important to consider the down payment and other costs of owning a home. Here are other costs you’ll need to consider:

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    Property taxes

    These vary by location and are usually paid annually or semi-annually.

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    HOA fees

    If your home is part of a community, you may need to pay homeowners association fees.

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    Maintenance costs

    Regular upkeep like repairs and replacements should be part of your budget.

Once you account for these expenses, use a mortgage calculator to estimate your monthly payments, including principal, interest, taxes and mortgage insurance. This will give you a clearer picture of what you can genuinely afford.

Edit your mortgage details
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Total monthly payment$1,271
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Total monthly payment$1,271

Step 5: Compare Mortgage Lenders

It's important to compare mortgage lenders to ensure you're getting the best terms and service. Here’s what to consider when evaluating your options:

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    Interest rates

    Even a small difference can significantly impact your total cost. Lower rates reduce your monthly payments and save you money over the life of the loan.

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    Fees

    Look for fees such as origination, application or underwriting. Some lenders charge higher upfront costs, which can increase your total loan expenses.

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    Loan options

    Different lenders offer various loan programs, including conventional, FHA, VA or USDA loans. Make sure the lender provides options that fit your financial situation and goals.

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    Customer service

    Good reviews and responsive support can smooth the mortgage process. A lender who communicates well can help you avoid unnecessary stress and delays.

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    Closing times

    Some lenders process loans faster than others. If you’re working with a tight timeline, it's important to choose a lender with shorter closing times.

Step 6: Get Preapproved for a Mortgage

A mortgage preapproval is when a lender reviews your financial information and provides a letter stating how much they’re willing to lend. It also strengthens your offers in competitive housing markets because it shows sellers you're a serious buyer and gives you a clear idea of your budget.

To secure preapproval, you must submit documents like tax returns, pay stubs and bank statements. The lender will then assess your credit score, income and debts to determine your loan eligibility.

Step 7: Complete the Loan Process and Close

The final stage of how to get a mortgage is completing the loan process and closing on your home. Here are five steps to help you through this phase smoothly:

  1. 1
    Home appraisal

    The lender will arrange an appraisal to confirm the home's value. Ensure the property meets the lender's criteria to avoid any delays.

  2. 2
    Underwriting

    The lender will review your financial details in depth. Be ready to provide any additional documents or clarifications they request to keep the process moving.

  3. 3
    Final loan approval

    Once underwriting is complete, the lender will give final approval. Double-check all loan terms to ensure everything matches what you discussed.

  4. 4
    Closing disclosure

    Review this document carefully, as it outlines your loan terms, closing costs and payment details. Ensure it aligns with your expectations before signing.

  5. 5
    Closing day

    Sign the necessary paperwork, pay your closing costs and the home is officially yours. Bring a valid ID and make sure all financial transfers are in place.

FAQ: How to Get a Mortgage

We’ve addressed commonly asked questions homeowners have about getting a mortgage. These answers will give you a better understanding of the steps involved, what to expect and how to move forward.

How do I get preapproved for a mortgage?

Can I get a mortgage with bad credit?

How can I get a lower mortgage rate?

How long does it take to get a mortgage?

How do I qualify for a mortgage?

Where can I get a mortgage?

About Zachary Romeo, CBCA


Zachary Romeo, CBCA headshot

Zachary Romeo is a certified Commercial Banking and Credit Analyst (CBCA), and the Head of Loans and Banking at MoneyGeek. Previously, he led production teams for some of the largest online informational resources in higher education, with over 13 years of experience in editorial production.

Romeo has a bachelor's degree in biological engineering from Cornell University. He geeks out on minimizing personal debt and helping others do the same through people-first content.