Congratulations! You've found the perfect home and you're ready to apply for a mortgage. This can be a daunting process, but if you follow these steps we'll guide you through it until you have your keys.

Check Your Credit Score

First, you’ll need to check your credit score. Your credit score is a three-digit number that ranks your ability to pay back loans and store accounts and determines whether or not you can get approved for certain types of loans. It also affects what interest rate you’ll pay on any mortgage loan, so it’s important to review yours before applying for one.

You can request a free copy of your credit report from one or all three major credit reporting agencies (Experian, Equifax, and TransUnion) by visiting AnnualCreditReport.com or calling (877) 322-8228. This site is the only way consumers can access their full credit reports without paying an agency fee. Credit scores are based on information in this report as well as other sources such as public records like bankruptcies, civil judgments against you and collection actions taken by lenders against you for them to collect debts owed them.

When checking your scores online at AnnualCreditReport® using Experian's Express Score service—the most widely used service—you'll see two scores from Experian: The VantageScore 3 (in some cases), which is the most commonly used score among creditors; and another version called the FICO Score 8 when available from our partner TransUnion® Bankcard Services Corp., which may be used by banks instead of VantageScore 3 for some types of lending decisions. The scores will appear right on the screen next to each other with explanations about what each one means.

Know How Much Home You Can Buy

Before you apply for a mortgage, you need to know how much home you can afford. This means knowing how much money your lender will allow you to borrow, and how much of that money should be spent on the house itself.

The difference between these two numbers is called the "household debt-to-income ratio" (DTI), which refers to how much debt a household carries compared with its income over a given time. The DTI ratio is calculated as follows:

• Total monthly debt payments divided by gross monthly income = DTI

Get Pre-approved

You'll want to get pre-approved before you start shopping for a home. A pre-approval is a written statement from a lender that indicates you qualify for a certain mortgage amount. Preapprovals are not binding, but they do give you an idea of how much home you can afford.

Getting pre-approved is the first step in the mortgage process and it takes about two weeks from the day your application is submitted to be processed by your lender.

Be Prepared to Answer Some Questions About Your Employment, Income, Assets, and Debts.

• What is your income?

• How much do you earn from your job?

• What do you receive in benefits, such as a pension or stock options?

• Do you have any other sources of income? For example, do you have a part-time job or own a small business that provides some additional cash flow?

• How many dependents need to be supported with the mortgage loan payment and any other expenses related to owning a home (e.g., property taxes)?

Get Your Paperwork Together

Now that you have the necessary information and documents, it’s time to get your paperwork together. When preparing for an appointment with a loan officer, you should have everything ready. Here is what you will need:

• Your most recent pay stubs (the last two weeks)

• A copy of your W-2 or other proof of income documents from the previous year

• A copy of your tax returns from the past two years (if applicable)

• A copy of any divorce decrees or court orders related to child custody and support arrangements

• If there is anything else that you think may help apply for a mortgage loan, such as letters from employers or clients about how long and in what capacity they have known about you, bring those along as well!

Submit a Formal Loan Application

To apply for a mortgage, you'll need to submit a formal loan application. This is the first step in the process of securing financing from a lender and it's when you're ready to make your case that you should be approved for the amount of money you seek.

The lender will review your application and decide whether or not to approve it. If approved, they'll send you a pre-approval letter that states how much money they are willing to lend—this can be used as proof when applying for other loans (like home equity lines).

Conclusion

We hope that this article has helped you to better understand how to apply for a mortgage.