Guide
How Does the Mortgage Process Work?
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The mortgage process touches a lot of moving parts - your credit, the home itself, an appraiser, a title company, a lender, and an agent. The actual sequence, though, is the same predictable set of six steps almost every time.
Step 1: Get pre-approved
Talk to at least three lenders before touring homes. A pre-approval involves a credit pull and a review of pay stubs, W-2s, tax returns, and bank statements. The lender issues a letter stating the loan amount you qualify for. Rates and fees vary more than most buyers expect, and a difference of even 0.25% can mean thousands of dollars over the life of the loan.
Step 2: Make an offer and go under contract
Your agent writes an offer that includes purchase price, financing terms, contingencies (financing, inspection, appraisal), and a target closing date. If the seller accepts, you are under contract. Earnest money - typically 1% to 3% of the purchase price - is deposited into escrow as a show of good faith.
Step 3: Home inspection and appraisal
A home inspector ($300 to $600) walks the property and writes up its condition, which is your chance to renegotiate, request repairs, or walk away if something serious appears. The lender separately orders an appraisal ($400 to $700) to confirm the home is worth the agreed price. If the appraisal comes in low, you can renegotiate, bring extra cash, or back out under the appraisal contingency.
Step 4: Underwriting
Underwriting is the lender's deep review of your finances and the property. An underwriter verifies income, assets, employment, and debts; reviews the appraisal and title report; and decides whether to approve the loan. Expect requests for more documents such as bank statement explanations, gift letters, and updated pay stubs. This phase usually takes 2 to 4 weeks.
Step 5: Clear to close and final walk-through
When underwriting finishes, the lender issues a clear to close. You receive a Closing Disclosure at least three business days before closing - a five-page document showing every dollar of your loan, interest rate, monthly payment, and closing costs. Compare it carefully to the Loan Estimate you received at application. A final walk-through of the home happens 24 to 48 hours before closing.
Step 6: Closing day
Closing typically happens at a title company or attorney's office. You sign the promissory note, the mortgage or deed of trust, the Closing Disclosure, and many additional disclosures. Wire your down payment and closing costs in advance, and always call the title company directly to verify wire instructions - never trust last-minute changes sent over email. Once everything is signed and the loan is funded, the deed records with the county and the home is yours.
Frequently asked questions
Key takeaways
- Pre-approval requires a credit pull and verification of pay stubs, W-2s, tax returns, and bank statements.
- Earnest money is typically 1% to 3% of the purchase price and is deposited into escrow when you go under contract.
- Home inspections cost $300 to $600 and lender-ordered appraisals cost $400 to $700.
- Underwriting usually takes 2 to 4 weeks and includes verification of income, assets, employment, debts, appraisal, and title.
- The Closing Disclosure is delivered at least three business days before closing and lists every dollar of your loan, interest rate, monthly payment, and closing costs.