Moving into a new house should be an exciting experience you’ll never forget—your mortgage shouldn’t get in the way. It shouldn’t generate stress or uncertainties but help you take a big step forward in your life and cross a huge to-do off your list.

To help you get your first mortgage without any drawbacks, we’ve put together a quick step by step guide for you. Whether you’ve applied to a loan before or not, this guide will help you maximize your chances of getting a great first mortgage. Let’s get right to it.

Step 1 – Improve Your Credit Score

If you have a good credit score, you can qualify for a mortgage faster and get a better interest rate. Brokers, as well as lenders, will look on you with better eyes. You will typically also have more options to choose from.

You can get your free copy of your credit report at AnnualCreditReport.com.

Here’s how to read your score:

• Fair: 580-669
• Good: 670-739
• Excellent: 740+ 

You can get a loan with a score that falls below 670, but with a good score, you’ll get a better deal. That’s why it’s wise to try to improve your score as much as possible before moving on to the next step.

• Try to pay off any debts you may have.
• Resolve any credit score errors you suspect may have crept into your report.
• Don’t apply for a new credit card before you submit your mortgage application.
• Hold off applying to new loans until you get your mortgage approved.

Pro tip: Use no more than 20% of the available credit on your card in the months before you apply for a mortgage. It will make your application look better. 

Step 2 – Figure Out How Much House You Can Afford

Once you feel comfortable with your credit score, you can calculate how much you can afford to pay for a house. The factors you need to take into account include:

• Your income
• Your savings
• Any outstanding debts you may have
• Any predictable events or developments in your life that could increase your costs, such as moving to a more expensive area

Don’t forget to factor in the down payment. To get the best rates on your mortgage, try to put aside 20% of the value of the property as a down payment. This is not always possible, though. As a rule, the more you can afford to pay as a down payment, the better.

Pro tip: Multiply your annual income by 2.5 and add to that any money you may have set aside for buying a house—the result is a broad estimate of how much you can safely spend on a new house. For example, if you make $80,000/year and have no savings, you should aim for a home that’s no more expensive than $200,000.

Step 3 – Choose the Right Broker

A good broker will help you find the right mortgage from the right lender. He or she can guide your decision while saving you time and bringing you peace of mind. Your broker can help you weigh the pros and cons of a fixed versus an adjustable rate loan, define the mortgage term, and understand the other features of the loan, such as the annual percentage rate, discount points, and closing fees. 

Pro tip: Choose a broker that specializes in mortgages, as opposed to a general broker that handles all types of loans. Local or regional experience is a plus.

Step 4 – Get Pre-Qualified

Getting pre-qualified helps you better understand how much mortgage you can get. It’s an informal process—you just answer a few questions that your mortgage professional asks you about your income and debts. Getting pre-qualified enables you to submit an application later on with more confidence.

Pro tip: Don’t confuse pre-qualified with pre-approved. Pre-approval may involve a soft inquiry during which the lender takes into account data provided by the credit bureaus. It’s the next-to-last step before you send your application.

Step 5 – Get Pre-Approved

Many lenders require pre-approvals or quick financial checks that enable them to make you an accurate mortgage offer. To get pre-approved, you may need to provide some documents, including proof of employment, list of assets, list of liabilities, bank statements, and tax returns.

Note that different lenders may require additional documents and have a slightly different pre-approval process in place. Ask your mortgage professional for more guidance if needed.

Pro tip: Getting pre-approved with multiple lenders can give you more options. It won’t hurt your credit score, provided you limit your pre-approval applications to a 30-day time frame.

Step 6 – Send Your Application

Once you’ve found the right offer and lender for you, go ahead and prepare your application. Your mortgage professional can provide valuable assistance during this stage.

If you choose a lender who has pre-approved you, you probably won’t have to send all your documents over again—only your most recent financial information, i.e. last month.

But note that your lender may require other documents depending on your situation. For example, if you’re self-employed, you may need to provide additional proof of your financial stability.

During this step, you will typically have to pay a non-refundable application fee to the lender to cover the costs of verifying that the property is in good standing with the title company, pay for the underwriting process, and more. The entire process may take several weeks.  

The loan estimate you will receive will include the interest rate, associated fees and closing costs, and the total loan costs.

Pro tip: Get on the electoral roll for your current address. Many lenders use the electoral roll to quickly verify your identity.

Step 7 – Wait Patiently for the Underwriting Process to End

Lenders use the underwriting process to determine your risk to default and verify all the information you’ve provided. This process includes credit and income analysis. The lender will look at your employment history and your debt-to-income ratio.   

You’ve invested quite a bit of time and effort to get here. Now it’s time to relax a bit. Mortgage underwriting may sound like a close inspection, but if you’ve followed the previous steps and got pre-approved, you should not have anything to worry about.

Pro tip: At this point, don’t switch jobs, get other loans, or make big purchases using your credit card line. Wait for your mortgage to get official approval first. Otherwise, your financial activities may influence the lender’s decision.

Step 8 – Get Ready for the Closing

The closing is the last step to financing a home, where everyone involved—including your agent, the seller’s attorney, the title insurance company, etc.—sits down at a table to sign the papers. In some cases, the signatures can be collected separately, which can increase the duration of the closing to a few weeks.

There are a couple of things you need to do to get ready for the closing:

• Buy homeowners insurance—it’s usually cheaper than letting the lender choose one at closing.
• Check the house one last time to make sure everything’s in order.
• Make sure you can cover all the closing costs—you can get a cashier’s check.
• Optional: buy a lender’s title policy.

Pro tip: Read carefully the closing disclosure, which you should get a few days before the closing. If you don’t understand something, discuss it with your agent.

The Wrap Up

As you can see, getting your first mortgage doesn’t have to be a complicated process. If you take it one step at a time and compare all your options, you shouldn’t come across any hurdles. Having a skilled and experienced broker on your side can make a big difference, so make sure you find a mortgage professional you can trust.