Applying for a mortgage can be tricky business. Not only are you—as the customer—expected to find a home of worthy of purchasing; you’re also supposed to navigate the slippery slope of finding a reputable lender with competitive interest rates, provide the proper paperwork, and keep money put aside for those pesky closing costs. However, just knowing what to expect can make the application process much easier. Generally, applying for a mortgage consists of the following steps:

1. Research

Start by deciding how much you can pay for a home, and what you can afford for monthly payments. If you’re already working with a real estate agent, s/he can give you a ballpark figure of what you can afford for both. If not, many lender and real estate websites offer worksheets to help you calculate what you can afford for a home.

2. Pre-Qualify

Find at least four lenders to see what loan amounts and terms you pre-qualify for. Mortgage interest rates and terms can vary significantly from lender to lender, so this is one of the most important steps in your loan application process.

3. Complete Mortgage Application

Once you’ve chosen a lender that best meets your needs, complete your mortgage application. Generally, your lender will asked a series of detailed questions concerning your work, financial, and residency history; as well as run a credit report. While there is no standard list of documents that lenders will require to run your application (requirements vary by state), it is a good idea to have the following documents ready:
• W-2 or 1099 statements for the last two years
• Tax return statements for the last two years
• Three months of bank statements/retirement/stock accounts
• Pay stubs for the last two months
• Derogatory credit explanations
• Divorce settlement documents, if applicable

4. Get Pre-Approved

Once you’ve completed the full loan application and provided the required documentation, you can now be pre-approved by your lender. This means that you can now shop for a home with the knowledge that your loan is approved (up to a certain amount).

5. Make an Offer

Once you make an offer on a home, your lender will begin the appraisal and inspection process of your new home to make sure that it meets lender requirements. Generally, this process takes less than a month, but timing can vary based on circumstances and location.

6. Close

Once the appraisal and inspection are completed (and meet the requirements of all parties involved) you’ll be scheduled for a “closing.” At the closing, you can expect to pay any remaining closing costs (such as appraisal fees, tax transfers, escrow deposits, etc…) and to sign an endless stream of paperwork. At the end of it all, though, you will be handed the deed to your new home.

Understanding the basic steps of applying for—and receiving—a home mortgage can make the entire process much more manageable. Putting money aside for those pesky closing costs, however, is a whole other story.