The mortgage application process involves pre-approval, document submission, underwriting, appraisal, and closing. Borrowers first obtain pre-approval from a lender to estimate loan terms and home affordability. Required documents include pay stubs, tax returns, bank statements, and employment verification. The lender reviews these materials to assess creditworthiness and debt-to-income ratio. A property appraisal ensures the home’s value aligns with the loan amount, while title research confirms ownership and encumbrances. Once approved, the loan closes with final disbursement.

This structured process ensures lenders mitigate risk while borrowers secure financing efficiently. Pre-approval reduces offer competition, as 64% of homebuyers with pre-approval were more likely to succeed in purchasing a home (National Association of Realtors, 2022). Underwriting criteria, such as a minimum credit score of 620 for conforming loans (Fannie Mae), filter unsuitable applicants. The average mortgage approval time is 30–45 days, with delays often caused by document errors or appraisal issues (Federal Housing Finance Agency, 2023). Appraisals prevent overvaluation, safeguarding lenders from default risks. Closing costs, typically 2–5% of the loan amount, cover legal and administrative expenses. Compliance with regulations like the Equal Credit Opportunity Act (ECOA) ensures fair treatment. This system balances accessibility with risk management, supporting the U.S. housing market’s stability.