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Financial Education

What to Expect During the First Mortgage Process

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Editors note: Steps may differ among lenders.

Taking out a first mortgage may initially sound intimidating. However, when you break down the steps and understand what happens during each stage, the process becomes much more manageable. Below is a step-by-step look at what you can expect when applying for a mortgage:  

Step 1: Submit Your Application

The road to securing a first mortgage begins with the application. Many lenders offer the option to complete this step entirely online. When filling out the application, you may be asked to provide basic information such as:

  • The desired loan amount
  • Employment data and your current annual income
  • A list of assets (money market accounts, savings/term accounts, etc.)
  • Your monthly obligations (student loans, auto loans, credit card bills, etc.)

Be sure to complete this first step as accurately as possible. The information you enter helps the lender determine your initial qualification for a mortgage. Therefore, it pays to have a wide range of financial documents in front of you to ensure you do not overlook a crucial piece of information. Before starting, gather previous tax returns, account balances for assets and debts, pay statements and more. Hold on to this paperwork, as you will use it again at later stages of the home mortgage process.

Step 2: Meet Your Loan Officer

After submitting your application online, you should receive a confirmation stating that the application was received. Expect to hear from a loan officer within the next day or so. He or she will review your application with you to verify the information you provided concerning income, assets, debt, employment and more.

At this stage, most loan officers will clarify essential aspects of the home-buying process and provide detailed answers to your questions regarding a wide range of topics including:

  • Loan products offered by the lender
  • Your credit report and the effect it has on your financing options
  • The process of locking in an interest rate
  • Various loan scenarios and associated costs
  • Closing costs
  • Remaining steps of the loan process and more

Once the loan officer verifies the information in your application, you may receive a pre-approval letter. This critical letter lets real estate agents and home sellers know that you possess an initial qualification for a mortgage. With this pre-approval letter in hand, you’re ready to interview realtors, research local market conditions and, ultimately, make an offer on your home! 

Step 3: Begin the Loan Approval Process; Meet the Mortgage Underwriter!

During the next phase, the lender’s mortgage underwriter reviews your application for accuracy and confirms the information you provided. The underwriter’s role in the process is to conduct a thorough review of your information to assess your qualifications and ability to repay the loan.

Once approved by the underwriter, you should receive several important documents which you will review carefully with the lender. These documents include:

  • Mortgage commitment letter: Similar to the pre-approval letter, this document indicates that the lender, by recommendation of the underwriter, fully reviewed your qualifications and pledges to lend you money. This letter may also list the type of loan you plan to use, the total amount of the loan, the terms of repayment and the estimated interest rate.
  • Loan conditions: Before you receive final approval from the lender, you may need to satisfy several loan conditions. These conditions may include providing proof of homeowner’s insurance, updated copies of bank statements, or satisfying requests for additional documentation the lender requires.
  • Loan estimate: A loan estimate gives you a detailed look at the estimated costs involved in your home mortgage. These items may include the costs of taxes and insurance, changes in future mortgage payments based on fluctuations in interest rates, as well as any special features of the loan.

Step 4: Lock in Your Rate, and Pay Applicable Fees

Be sure to thoroughly review all loan documents with the lender’s underwriting team (or, your Loan Officer) and ask plenty of questions. You’ll want to ensure you fully understand the financial commitment you are about to make. Most lenders are happy to help you understand the steps involved and support you along the path to homeownership.

When you’re ready to lock in your interest rate, you’ll be required to pay the applicable rate lock fees. Typically, charges at this stage include the application fee as well as the cost of ordering a home appraisal from a third party. 

Step 5: Loan Processing and Appraisal: Meet Your Loan Processor!

Once you have paid all applicable initial fees, you will then work directly with a loan processor from the lender to clear all loan conditions from Step 3. Additionally, at this stage, the loan processor formally places the order for a home appraisal. This appraisal authorizes an objective third party to assess the fair market value of the home you wish to purchase. Through this assessment, the lender determines if the loan amount you requested is appropriate based on the home’s value. 

Step 6: Satisfy All Loan Conditions 

Grab those documents you started pulling together in Step one. At this stage in the process, you’ll provide copies of this paperwork and more to the lender’s loan processing team (many of these docs may also be requested during the underwriting stage). These documents may include:

  • Verification of homeowner’s insurance
  • Income confirmation documents
  • Records of your assets
  • Contract of sale (if applicable)
  • Verification of gift funds from a third party (if applicable)
  • Title (if applicable)
  • More at the lender’s discretion

Step 7: You’re Ready to Close!

You’ve met the lender’s conditions for the loan, and you’re nearly ready to close on your first mortgage! During this final stage, the lender will contact you to schedule a closing date and provide you with a copy of the Closing Disclosure (also known as a Settlement Statement). Carefully review this document to ensure that all services and fees related to your mortgage are accurately listed.

Additionally, this document will help you understand the costs you are responsible for paying at closing. These costs may include:

  • Loan processing and origination fees
  • Appraisal fees
  • Fees for credit reports
  • Home inspection fees
  • Mortgage insurance premiums
  • Homeowner’s insurance premiums
  • Title insurance fees
  • Attorney’s fees and more

On the day of closing, you will need to bring a certified check or arrange a wire transfer. After paying closing costs and signing all required documents…you should receive the key to your home!

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CUNA 2023 Diamond Award Winner

Financial Education

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