6-Step Guide to Navigating the Mortgage Approval Process

Getting approved for a mortgage is an important step in making your home-buying dream a reality. Even though each lender has their own specific approval requirements, many use the same factors when reviewing mortgage applications. Your credit score, income stability and existing debt all play important roles in approving a home loan. 

The mortgage application process can take a few weeks if you’re buying an existing home or several months for new construction, says Matt Baker, a Veteran and Navy Federal Credit Union’s Regional Manager in Field Mortgage. “It’s essential to communicate your specific situation with your lender to ensure a mutual understanding of your needs between both parties. We advise obtaining preapproval early in the process and being ready to provide requisite documentation in a timely manner, along with maintaining effective communication with your lender, to minimize any potential delays.”

When you understand what lenders are looking for, you can better position yourself for success before you apply and help the process go more smoothly. With some preparation and patience, you’ll be ready to navigate the approval process with confidence.

Step 1: Get a mortgage preapproval

During the mortgage preapproval stage, lenders review your financial information to estimate how much money you might be able to borrow. (You can get a sense of your borrowing potential with this mortgage calculator.) This information can help you shop for homes within your budget and shows sellers you’re a serious buyer.

Mortgage preapproval steps

Here are 3 things that happen during the mortgage preapproval process:

1. The lender checks your credit score and history.
2. You provide basic financial information for them to review.
3. The lender gives you a preapproval letter with an estimated loan amount.

Remember that preapproval is different from final mortgage approval. The preapproval gives you a good starting point for house hunting. The lender will look more closely at your finances later during the full approval process. 

Preapproval letters typically last 60-90 days, which ideally gives you time to find the right home at the right price.

Step 2: Submit your full mortgage application

Once you’ve found a home you want and your offer has been accepted, it’s time to submit your complete mortgage application. This is when the mortgage approval process begins. You’ll work with a mortgage loan officer, who will guide you through the paperwork and requirements. 

“Collecting all required financial documentation in advance can facilitate a smoother process,” Baker says.

Mortgage application documents

During the application step, you’ll need to provide more detailed documentation, including:

• Proof of income, including pay stubs, W-2s, tax returns and, for servicemembers, leave and earnings statements (LES)
• Bank statements showing your assets
• Details about the property you want to buy
• Proof of down payment funds, if required for the loan type
• Information about your employment history

Your lender will use this information to create your home Loan Estimate. This document outlines your estimated interest rate, monthly payment and closing costs. Take time to review this information carefully and ask questions about anything you don’t understand.

Step 3: Enter the underwriting process

During underwriting, mortgage specialists thoroughly review your financial situation and the property details to decide if the loan meets their requirements. This helps ensure the lender isn’t taking on any unnecessary risks.

Understanding underwriting

Throughout the underwriting process, lenders typically evaluate:

• Your credit history and credit score
• Your debt-to-income (DTI) ratio
• Employment stability and income verification
• Your down payment amount and source of funds
• The property’s appraised value compared with the purchase price

Underwriters may request additional documentation during this stage. Responding quickly to these requests helps keep things moving. The underwriting process often takes 1-2 weeks but can be longer depending on your situation.

7 common factors that can affect your mortgage approval

Understanding what lenders look for can help you prepare for a successful home loan application. Here are 7 important factors that typically influence mortgage approvals.

Step 4: Get a home appraisal and inspection

Your lender will order a professional home appraisal to verify its market value. This protects both you and the lender by making sure the home is worth at least as much money as you’re borrowing with the mortgage.

The home appraisal and inspection process

Here are 5 things that typically happen during the appraisal and inspection phase:

1. An independent appraiser evaluates the property.
2. The appraiser compares the home to similar properties recently sold in the area.
3. The appraiser determines the current market value.
4. Your lender reviews the appraisal report.
5. A title search verifies legal ownership of the property and checks for any claims or liens.

A home inspection isn’t required by lenders, but it’s recommended. A thorough home inspection can identify potential problems with the property before you finalize your purchase. If significant issues are found, you might be able to negotiate repairs with the seller—or reconsider your purchase decision before your closing date.

Step 5: Receive the final mortgage approval decision

After completing the underwriting process and reviewing the appraisal, your lender will make a final decision on your mortgage application. This typically results in one of 3 outcomes:

• Approved: Your loan is fully approved with no additional conditions.
• Approved with conditions: Approval depends on meeting specific requirements like providing additional documentation or making certain financial adjustments.
• Denied: Your application doesn’t meet the lender’s requirements at this time.

Mortgage approvals with conditions

If your loan is approved with conditions, don’t worry. It’s not uncommon for more work to be done before final approval can be given. Required conditions include providing proof of insurance, clarifying information on documents and explaining recent large bank deposits. Work closely with your loan officer to address any conditions promptly.

Mortgage disapprovals

If your application isn’t approved, ask your lender for specific feedback about why it was denied and discuss potential solutions, Baker says. “This may include enhancing your credit score, reducing existing debt or increasing your down payment. Additionally, you might want to explore various mortgage products or engage with a credit counselor to enhance your financial health.”

Step 6: Go to closing to finalize buying your home

Once you receive final approval, you’re ready to close on your new home. A few days before closing, you’ll receive a Closing Disclosure that outlines your final loan terms, monthly payments and closing costs.

Closing on a property

Here are 5 things to expect during the closing process:

1. You’ll review and sign numerous legal documents.
2. You’ll pay your closing costs and down payment.
3. The property title will transfer to your name.
4. Your lender will distribute the mortgage funds.
5. You’ll receive the keys to your new home.

The closing process typically takes 1-2 hours, though it varies depending on your situation. Some lenders now offer digital closing options to streamline the process.

How long does the mortgage approval process take?

One of the most common things homebuyers ask about is approval time. Typically, the mortgage approval process takes 30-45 days from application to closing, but that can vary based on several factors, including:

• Your financial situation and documentation readiness
• The current real estate market and the lender’s workload
• The type of loan you’re applying for
• The complexity of your financial situation
• The property’s condition and appraisal timeline
• Whether the home is existing or new construction

Being patient during this process is important, but there are ways to help things move more efficiently. Responding quickly to requests for information, having your documents organized and maintaining your financial stability during the process can help keep things on track.

Start your home-buying dream with Navy Federal

The mortgage loan process might seem intimidating at first, but it’s much more manageable when you know what to expect. With the right preparation and guidance, you can be better prepared to purchase a home you’ll love. 

Ready to learn more about the mortgage process or explore your loan options? Navy Federal is here to help. Explore our homeowner resources and apply for a mortgage loan today.