How to Navigate the Mortgage Process: A Comprehensive Guide

Shopping for a mortgage can be more complex than comparing credit cards or auto loans, but it’s time well spent. A mortgage will likely be the largest loan you ever take on, and interest rate savings of even a half of a percent could save you thousands of dollars over the life of the loan. Below, we break down the steps you can take to prepare, get preapproved, and compare mortgage offers.

Check Your Credit Score and Credit Report

Your credit history and credit scores can have a big impact on your eligibility for a mortgage and the rate you receive. Check your credit reports early in the process in case there are any inaccuracies that you want to dispute. Ideally, you can get everything resolved before you go into contract (when your offer is accepted) to avoid potential complications.

Improving your credit scores can also take time, so the sooner you know where you’re at, the better. You can get your Experian credit report for free with an Experian account, complete with explanations for different parts of the report and what factors are helping and hurting your score the most.

You can also request a free copy of your credit reports from Experian, TransUnion, or Equifax via AnnualCreditReport.com. Or, you can use a premium Experian membership to monitor your credit reports from all three bureaus and credit scores for each.

Most mortgage lenders use older credit scoring models that you can’t check for free, or even with many paid subscriptions, to make decisions. That’s set to change by the end of 2025, but in the meantime, know that the scores you check on your own likely won’t match the ones that mortgage lenders use. Still, many of the actions you take to improve your credit can, over time, help all your credit scores.

Gather Personal and Financial Documents

Once you know where your credit is at, it’s time to get your documents ready for a preapproval or prequalification—more on that below. It can take time to gather all the material. But many of the documents are required for the final mortgage application anyway. You’re just getting some of the work done early.

The specifics can depend on your situation, but required documents may include:

Personal Documents

• Copy of a government-issued picture ID, such as a passport or driver’s license
• Copy of your Social Security card
• Your work history from the previous two years
• Recent rental history with the landlords’ information
• Immigration documents, if applicable
• A gift letter, if someone is giving you money for the purchase

Financial Documents

• Recent pay stubs or a job offer letter
• Proof of other income, such as disability, Social Security, alimony, or child support
• Tax returns from the previous two years
• Other recent tax documents, such as W-2s and 1099s
• A profit-and-loss statement and tax returns for your business, if applicable
• Recent statements from various accounts: Checking, Savings and certificates of deposit (CDs), IRA, 401(k), 403(b) or other retirement accounts, Brokerage
• Recent loan and bill statements
• Statements showing the accumulated cash value of life insurance policies
• Information about other properties you own, if any

Contact Loan Officers and Brokers

You can now start reaching out to mortgage loan officers and brokers.

Brokers

Independent professionals who can help connect you with various mortgage lenders. They can take your information and shop around to help you find the best offer.

Loan Officers

The person you work with when applying directly with a mortgage lender, such as a credit union, bank, or non-bank mortgage lender.

There are pros and cons to working with each type of professional to get a mortgage. For example, having a mortgage broker compare rates on your behalf might help you save time and get a better loan. However, loan officers might have access to loan types and deals that their financial institution doesn’t offer via loan brokers.

Contact several brokers and loan officers to see if they can help you based on your situation. Be sure to discuss where you want to buy a home, your credit, and how much you’ve saved for the purchase. And ask if they’re aware of any special programs, loans, or grants that can help—often, these are for low-income or first-time buyers.

Get Preapproved for a Mortgage

Try to get preapproved for mortgages with your favorite brokers and loan officers, including those with financial institutions you already do business with. Although you might need to complete an initial application with each one, they’ll likely ask for similar documents and information.

A preapproval can give you an estimate of whether you’ll be approved and the terms of your loan. The lender can also give you a preapproval letter that can make your offer more appealing because it reassures sellers that you can likely get a loan.

Credit checks associated with preapproval could lead to hard inquiries and hurt your credit a little. But you don’t need to be overly concerned. Credit scores count multiple mortgage inquiries as one inquiry if they happen within 14 to 45 days, depending on the type of score. For that reason, it’s best to submit preapproval applications within the same two-week period to reduce credit score harm.

One potential point of confusion is that lenders sometimes use the terms preapproval and prequalification interchangeably. There’s a type that tells you whether you’ll likely get approved based on what you state in the application, and a more rigorous process that involves verifying your stated information and performing a credit check.

The more rigorous option, what we’re calling a preapproval, may be better because it gives you a more accurate sense of the type and size of loan you may qualify for. However, even a rigorous preapproval doesn’t guarantee approval. A lost job, significant drop in your credit score, or other change could still affect your mortgage application.

Consider the Type of Loan

Once you’re preapproved, your loan officer or broker can walk you through the options and the pros and cons of the various types of loans. But here’s a high-level breakdown of the common types of mortgages.

Conventional Loans

A conventional loan is a mortgage that lenders offer to borrowers without going through a government-backed program. Many conventional loans are conforming loans, meaning they align with government guidelines for loan amounts and eligibility.

Conforming conventional loans may generally require a down payment of at least 3%, a FICO® Score of 620, and a debt-to-income ratio (DTI) under 51%. But you might qualify for better terms and avoid paying for mortgage insurance if you have a larger down payment, better credit, and lower DTI.

Lenders can also offer non-conforming conventional loans with different requirements and terms.

Jumbo Loans

A jumbo loan is a type of nonconforming conventional loan that has a loan amount higher than federal loan limits. The specific amount may adjust based on inflation and to account for differences in various housing markets.

Jumbo loans may require a larger down payment and better credit, and you may need to prove that you have money in reserve that you can use to help cover mortgage payments during a setback.

Government-Backed Loans

Federal agencies back certain types of mortgage loans to make it easier for people to buy a home. The three common options are:

FHA Loans

The Federal Housing Administration (FHA) insures FHA loans, which tend to have lower down payment and credit requirements than conventional loans. There are also different types of FHA loans, including options that can give you money for energy-efficient improvements or home renovations. However, they all may require a mortgage insurance premium that can add an extra upfront and monthly payment.

VA Loans

The U.S. Department of Veterans Affairs (VA) backs VA loans for eligible service members, veterans, and surviving spouses. Although VA loans may require an upfront funding fee, they don’t require a down payment or mortgage insurance and could offer lower rates than other loans.

USDA Loans

The U.S. Department of Agriculture (USDA) backs USDA loans for low-income borrowers who want to buy a home in an eligible area. Some may require a guarantee fee, which is similar to mortgage insurance, but they also offer low interest rates and don’t necessarily require a down payment.

Fixed- and Adjustable-Rate Loans

Fixed-Rate Mortgage

With a fixed-rate mortgage, your loan’s interest rate will stay the same over the lifetime of the loan. Lenders typically offer 15- and 30-year loans, and a fixed rate can make your monthly payments predictable.

Adjustable-Rate Mortgage (ARM)

There are different types of ARMs, but they all generally have an interest rate that’s fixed for a certain amount of time and then can change every six months or year. For example, a 5/1 ARM will have a fixed rate for five years and then the rate can adjust up or down once a year. There may be limits on how much it can adjust with each change and how low or high it can go overall.

ARMs can be attractive because they often start with a lower rate than a fixed-rate loan, but you risk having to make higher payments if the rate rises before you sell the home or refinance.

Compare Rates and Fees

Once you’ve been preapproved for mortgage loans from several sources, compare the down payment requirements and fees. Also, consider other differences, such as who was easiest to work with and whether you’ll need to go to a branch to complete the process. If you’re considering an ARM, ask if the loan has a prepayment penalty—that could affect the cost of refinancing in the first few years.

The interest rates on the offers are also important, especially if there’s a big difference between the rates. But know that rates may adjust daily, and sometimes several times a day. Some lenders might let you lock your rate while shopping for a home, while others may only allow you to lock the rate after your offer is accepted.

Frequently Asked Questions

What Credit Score Do I Need to Buy a House?

The credit score needed to buy a house can vary depending on the type of loan and the lender’s requirements. Generally, a higher credit score can help you secure better terms and lower interest rates.

Does a Mortgage Preapproval Hurt My Credit Scores?

Mortgage preapproval can lead to hard inquiries on your credit report, which might slightly lower your credit score. However, multiple mortgage inquiries within a short period (14 to 45 days) are usually counted as one inquiry.

Can You Switch Mortgage Lenders Before Closing?

Yes, you can switch mortgage lenders before closing, but it may involve additional costs and delays. It’s important to weigh the pros and cons before making a decision.

Improve Your Credit and Shop to Get the Best Mortgage

Shopping for a mortgage can help you find a loan officer or broker who you want to work with and get you the best possible rate and terms on your loan. But unless you already have excellent credit, improving your credit scores could also help you get a better rate with any type of mortgage.

Check your FICO® Score for free with Experian to get insights on what’s helping and hurting your score the most. Then, try to take steps to improve your mortgage while searching for your new home.

At O1ne Mortgage, we are dedicated to helping you navigate the mortgage process with ease. Our team of experienced loan officers and brokers is here to assist you every step of the way. Call us at 213-732-3074 for any mortgage service needs. We look forward to helping you secure the best mortgage for your dream home.