The Ultimate Guide to the Mortgage Application Process

Thinking about buying your first home? The process feels exciting until you hit the wall of mortgage terms, credit checks, and stacks of paperwork. Many buyers start looking at houses before they figure out how the financing works. That mistake often leads to frustration, delays, or losing out on the home you want.

Here’s a straightforward guide to walk you through the steps-from getting your finances ready to making it across the closing table.

The mortgage process starts well before you sit down with a lender. Preparation makes the difference between a smooth approval and a stressful rejection.

Lenders look at whether you can repay. They don’t ask if the payment leaves you breathing room. That’s your job.

• Keep your total home payment (mortgage, insurance, taxes, HOA fees if any) at or below 28% of your gross monthly income.

• Add your other debts (car loan, student loan, credit cards, child support). Lenders look at this combined figure.

• The rest of your income must cover groceries, health care, childcare, utilities, and repairs.

Get Pre-Qualified and Save Up to 1.5% at Closing with reAlpha

Save up to 1.5% at closing when you combine real estate and mortgage services with reAlpha.

Check if you qualify

Your credit score and DTI shape the loan terms you get.

1. Higher credit scores get lower interest rates.

2. Most lenders prefer a DTI of 36% or less, but some programs allow up to 43% to 50%.

3. Improving your standing:

• Pay down debt and always pay on time.

• Don’t apply for new credit or make big purchases before closing.

• Check your credit report for errors at annualcreditreport.com. Disputing mistakes can raise your score fast.

Down payment size and loan type matter more than you think.

• First-time buyers usually put down around 7%.

• Conventional loans: 620+ credit score, 3% down, PMI required if less than 20% down.

• FHA loans: 580+ for 3.5% down (as low as 500 with 10% down). Includes upfront and ongoing insurance.

• VA and USDA loans: often no down payment, but limited to eligible borrowers and areas.

• Putting down 20% or more gives the best terms but don’t wipe out all your savings to do it.

Takeaway: Before you look at houses, know your numbers. If you can’t explain what monthly payment you’re comfortable with, you aren’t ready.

This feels backwards but it saves you stress.

Pre-approval shows sellers you are serious and helps you stay within your budget.

• Involves a full credit check and review of your income, assets, and debts.

• You’ll get a conditional letter with the maximum loan amount.

• Compare lenders-community banks, credit unions, brokers, and online lenders. Aim for at least three.

• Rate shopping within a 14–45 day window counts as one credit inquiry.

Each lender must send a Loan Estimate within three business days.

Focus on:

• Total Loan Costs (see Section D of the Loan Estimate).

• Annual Percentage Rate (APR).

• Total Interest Percentage (TIP).

Pro tip: Locking an interest rate protects you for a set time, but extending that lock costs money.

Lenders need proof you can pay. Typical requests:

• Two years of W-2s and tax returns.

• Recent pay stubs and bank statements.

• If self-employed: two years of tax returns and a profit-and-loss statement.

• Gift money for down payment? Provide a gift letter and bank records.

Takeaway: Think of mortgage shopping like job hunting. You don’t accept the first offer without comparing terms.

Buying a Home? Get up to 1.5% Cash Back at Closing

Get pre-approval first, then start exploring homes knowing you can receive up to 1.5% of the home price back at closing.

Find your dream home

The mortgage process doesn’t end with pre-approval. The heavy lifting happens during underwriting.

• Lender verifies income, debts, assets, and credit.

• Appraisal ensures the property value matches the loan amount. FHA appraisals have stricter safety rules.

• Title search checks for liens or unpaid taxes.

• Review the Closing Disclosure at least three days before signing. Compare it with your Loan Estimate.

• Plan for closing costs (2% to 6% of loan amount) plus your down payment.

• Do a final walk-through of the home to confirm repairs are done and the property is in agreed condition.

Not every application gets approved. Here’s why some get denied:

• High DTI.

• Low credit score.

• Low appraisal.

• Unverified income or assets.

• Errors in paperwork.

If you’re denied, lenders must explain why. Fix the issue-pay down debt, improve your credit, or choose another loan program-and try again.

Buying a home is more than walking into open houses. It’s about proving to a lender that you’re financially stable and prepared.

For first-time buyers, the best moves are clear:

• Define affordability on your terms, not the lender’s.

• Strengthen your credit and manage your debts.

• Get pre-approved before you shop for homes.

• Compare lenders with care.

• Review every document before signing.

Are you prepared to start with your finances before looking at homes, or do you feel the pull to start house hunting first? Your answer shapes how smooth your buying journey will be.

With reAlpha, you keep a substantial portion of the buyer agent commission back while gaining access to AI-powered insights on affordability, timing, and market forecasts.

Sign up free with reAlpha today