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.

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.

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.

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.

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.

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:

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.

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:

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.

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:

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.