How to Get a Mortgage: Step-by-Step Guide for First-Time Buyers

Buying a home is the biggest purchase most people ever make, and for nearly everyone it involves a mortgage. The process can feel overwhelming — credit checks, paperwork, unfamiliar terms and big numbers. But broken into steps, it becomes manageable, and preparing well can lower your interest rate and save you tens of thousands of dollars over the life of the loan.

What is a mortgage?

A mortgage is a loan used to buy real estate, with the property serving as collateral. If you don’t repay, the lender can foreclose. Mortgages typically run 15 or 30 years, with monthly payments covering principal, interest and often property taxes and insurance (held in an escrow account).

Step 1: Figure out what you can afford

Lenders look closely at your debt-to-income ratio (DTI) — your monthly debt payments divided by your gross monthly income. A common guideline is the 28/36 rule:

• Housing costs (principal, interest, taxes, insurance) at or below 28% of gross income
• Total debt payments at or below 36%

Some loan programs allow higher ratios, but staying within these limits leaves room for savings and surprises.

Example: With a gross income of $8,000 a month, a housing payment of up to about $2,240 and total debts of about $2,880 fit the 28/36 guideline.

Remember the other costs of owning: maintenance (often 1% or more of the home’s value per year), utilities and HOA fees. Test different prices and rates with our loan calculator.

Step 2: Check and strengthen your credit

Your credit score has a major effect on your rate. Typical minimums:

Several months before applying, pay every bill on time, pay down credit card balances and avoid opening new accounts. See how to improve your credit score.

Step 3: Save for the down payment and closing costs

Putting 20% down on a conventional loan avoids private mortgage insurance (PMI), which protects the lender and adds to your monthly cost. PMI can usually be removed once you reach enough equity.

On top of the down payment, budget 2–5% of the loan amount for closing costs, and keep an emergency fund intact after you buy.

Step 4: Choose a loan type

• Conventional loans: Not government-backed; competitive rates for strong credit.
• FHA loans: Government-insured; easier credit requirements but mortgage insurance premiums.
• VA loans: For eligible veterans and service members; no down payment or PMI.
• USDA loans: For eligible rural and suburban buyers; no down payment.
• Jumbo loans: For amounts above conforming loan limits; stricter requirements.

Fixed vs adjustable rate

• Fixed-rate: The rate and principal-and-interest payment never change. Predictable and popular.
• Adjustable-rate (ARM): A lower introductory rate for a set period (e.g., 5 or 7 years), then the rate adjusts with the market. Can make sense if you plan to move or refinance before the adjustment — but carries payment risk.

15-year vs 30-year

A 15-year mortgage has higher payments but a lower rate and dramatically less total interest. A 30-year mortgage keeps payments lower and more flexible. You can always pay extra on a 30-year loan if your lender has no prepayment penalty.

Step 5: Get pre-approved

A pre-approval involves a credit check and verification of income, assets and debts. It tells you how much you can borrow and shows sellers you’re a serious buyer. You’ll typically need:

• Recent pay stubs and W-2s or tax returns
• Bank and investment statements
• Photo ID and Social Security number
• Information on existing debts

Step 6: Shop for the best rate

Get Loan Estimates from at least three lenders — banks, credit unions, online lenders and mortgage brokers. Compare:

• Interest rate and APR
• Lender fees and origination charges
• Discount points (paying upfront to lower your rate)
• Rate-lock terms

Credit scoring models usually treat multiple mortgage inquiries within a short window as one, so rate shopping won’t significantly hurt your score. Our guide to comparing loans explains the details.

Why it matters: On a $350,000 30-year loan, the difference between 6.5% and 7.0% is roughly $115 a month and more than $40,000 over the life of the loan.

Step 7: Make an offer, appraisal and underwriting

After your offer is accepted, the lender orders an appraisal to confirm the home’s value and moves your file through underwriting, verifying everything again. Avoid big purchases, new credit or job changes until closing. A home inspection — separate from the appraisal — is strongly recommended to uncover problems before you commit.

Step 8: Closing

You’ll receive a Closing Disclosure at least three business days before closing. Compare it with your Loan Estimate, ask about any differences, then sign the paperwork, pay closing costs and get your keys.

Common first-time buyer mistakes

1. Shopping for homes before getting pre-approved
2. Accepting the first rate offered
3. Draining all savings for the down payment
4. Taking on new debt during underwriting
5. Underestimating ongoing ownership costs

Not sure whether buying beats renting for you? Run the numbers with our rent vs buy calculator and read our rent vs buy guide.

Conclusion

Getting a mortgage comes down to preparation: know what you can afford, strengthen your credit, save for the down payment and closing costs, choose the right loan type, get pre-approved and compare offers from several lenders. Each step can lower your costs — and make the path to homeownership far less stressful.