The Five Step Mortgage Process (2024)

FAQs

What are the 5 steps of the mortgage process? ›

If you are pre-approved or credit pre-approved for a loan before you start the home shopping process, your mortgage could close in as little as two to three weeks after your offer is accepted on a home.

When it comes to how long does it take to get a mortgage approval, it can typically take 2-4 weeks after submitting your mortgage application to getting a mortgage offer. But it can take longer, for example if issues are thrown up in the mortgage valuation. Read more in our guide on Mortgage valuations explained.

The Underwriting Process of a Loan Application

One of the first things all lenders learn and use to make loan decisions are the “Five C's of Credit": Character, Conditions, Capital, Capacity, and Collateral. These are the criteria your prospective lender uses to determine whether to make you a loan (and on what terms).

It's recommended you have a credit score of 620 or higher when you apply for a conventional loan. If your score is below 620, lenders either won't be able to approve your loan or may be required to offer you a higher interest rate, which can result in higher monthly mortgage payments.

However, even though prospective homebuyers get pre-approved for a mortgage before shopping for homes, there's no 100% guarantee they'll successfully get financing. Mortgages can get denied and real estate deals can fall apart — even after the buyer is pre-approved.

How do you know if your mortgage has been approved? ›

Once it's finished, you'll receive a formal mortgage offer from your lender. That means it's official: your application has been approved. You'll usually get this in the mail, though if you're using a broker, they'll likely give you a heads-up it's on the way.

How do you know when your mortgage loan is approved? Typically, your loan officer will call or email you once your loan is approved. Sometimes, your loan processor will pass along the good news.

If anything they find doesn't align with their lending policy, you will be declined. The next stage where you might get declined occurs once you make an offer on your property and the mortgage moves into underwriting. Here, a lender will carry out more in-depth financial checks and 'hard search' your credit file.

The mortgage process is complicated but can be broken into a number of steps: pre-approval, house shopping, mortgage application, loan processing, underwriting, and closing. It's a good idea to get pre-approval for a mortgage before you start looking for a property, so you know what you can afford.

A mortgage offer can be withdrawn at any stage of the process, from the initial application to the day of completion. However it's extremely unlikely you would have a mortgage offer withdrawn after exchange of contracts. The later you are in the process, the more likely it is that you could lose non-refundable fees.

So, what do lenders look at when deciding to approve or deny an application? Lenders consider four criteria, also known as the 4 C's: Capacity, Capital, Credit, and Collateral. What is your ability to pay back your mortgage?

Completion

Once you've accepted the mortgage offer from your lender, there are only 2 major steps left. Signing contracts and the transference of your deposit money. Your solicitor will contact you to arrange a date to sign contacts and confirm the transference of your deposit.