Step 1: Preapproval (and how it differs from prequalification)
The label matters less than what's behind it: a prequalification can rest on numbers you report yourself; a preapproval means the lender verified income, assets, and credit. Neither guarantees a loan, but get the verified kind before making offers. Ask the lender: "Did you verify my income and pull my credit for this letter?"
Step 2: Shop lenders with Loan Estimates
Every lender must use the same three-page Loan Estimate, so offers line up side by side. Compare five things: the rate, and whether it's locked in. The APR — the yearly cost with fees folded in (page 3). The total closing costs, including what the lender itself charges (page 2). Points — paying money up front to get a lower rate — and credits, which are the reverse; ask every lender to quote the same setup, like zero points, so you're comparing straight across. And the list of services you're allowed to shop for yourself. Shopping pays — two quotes could have saved 2022 borrowers up to $600 a year, four or more over $1,200, per Freddie Mac.
Should you use a mortgage broker, or go direct?
This is the fork in the road most guides skip. Here's the honest version.
What a broker actually does
A broker doesn't lend money. They take your application, shop it to lenders they work with, and help you land a loan. A lender funds the loan; some companies do both.
How brokers get paid
The broker's pay comes from you or from the lender — federal rules say it can't be both on the same loan. The rules also say a broker's pay can't go up because your loan costs more, which removes some of the temptation to steer you into a pricier loan. Whatever they earn shows up in the fees section of your Loan Estimate, so you can see it in writing. Before you work with anyone, ask what they charge and who pays it.
The case for a broker
One application, many lenders. Access to lenders that don't take applications from the public at all — they work only through brokers (United Wholesale Mortgage is the big example). That's a slice of the market you can't shop on your own. And real help if your situation is complicated: self-employed, income that changes month to month, a recent job change. A broker who knows many lenders' rules can find one that fits you, instead of you collecting a "no" from the one bank you tried.
The case against
Brokers can't see the whole market either — some banks and credit unions only lend direct, so a broker's "best offer" is the best of their network. Compensation rules reduce steering incentives, not erase them. Quality varies — brokers are individual licensed people and small businesses, and you have to check them out first. And on a tight deadline, one more middleman is one more place things can slow down.
How to vet a broker
Look them up at NMLS Consumer Access (nmlsconsumeraccess.org — NMLS is the Nationwide Multistate Licensing System) — the free public lookup for the licensing database used across the industry. Search the person and the company; confirm the license is active in your state. Then ask three questions: Who pays you on my loan, and how much? How many lenders do you actively work with? Can you show me Loan Estimates from more than one lender?
When going direct wins
Going direct usually wins when your situation is simple: a regular paycheck, good credit, and a normal down payment. Big lenders and credit unions compete hard for borrowers like that, and you can collect three Loan Estimates yourself in an afternoon. It also wins when your own bank offers a real discount for being a customer (get it in writing on a Loan Estimate), or when you just want one company responsible for the whole thing. Either way the CFPB's advice is the same: always shop. A broker's offer is just another Loan Estimate — put it next to a direct quote and let the numbers decide.
Step 3: Check the government and state programs
FHA (Federal Housing Administration — lower down payments), VA (Department of Veterans Affairs — nearly 90% of VA-backed loans close with no down payment), USDA (U.S. Department of Agriculture — 100% financing in eligible rural areas for households up to 115% of median income), and your state housing finance agency (down-payment assistance and first-time-buyer programs — find yours via the NCSHA directory). Free counselors approved by HUD (the federal housing agency) can sort out what you qualify for.
Step 4: Application to closing — what underwriting checks
Once your offer is accepted, the loan goes into "underwriting" — which is just the lender's fact-check. They confirm the income, savings, debts, and credit you claimed, and they check out the house itself. Expect 30 to 60 days. Respond to document requests fast, and don't change your financial picture mid-stream — even a locked rate can change if your application changes.
The appraisal
The lender will usually require an appraisal — a written opinion of the property's value — and can require you to pay for it. You're entitled to copies promptly, no later than three days before closing. The appraisal step alone can take up to two weeks.
Rate locks
A lock holds your rate if you close within the window and nothing on your application changes; typical periods are 30, 45, or 60 days. Extensions can be expensive, and a lock can keep you from a lower rate if rates fall. Ask what different lock lengths cost and pick one covering your realistic closing date.
PMI: what it is and how to get rid of it
Put less than 20% down on a standard loan (one that isn't FHA, VA, or USDA) and you'll usually pay private mortgage insurance. It protects the lender, not you — but it isn't forever. You can ask for it to be cancelled when your loan balance is on schedule to hit 80% of what the home was worth when you bought it. Ask in writing, be current on payments, and have no other loans against the house; the lender may want an appraisal showing the value held up. It ends automatically at 78% if you're current. And no matter what, it must end once you're halfway through the loan's schedule — 15 years into a 30-year loan. FHA and VA follow different insurance rules. Put the 80% date on your calendar — servicers cancel when required, but you have to ask.
Escrow: why your payment is bigger than principal and interest
Most mortgage payments include a little extra each month that goes into a holding account (called escrow). Your loan company uses it to pay your property taxes and home insurance when those bills come due. When taxes or insurance go up, that piece of your payment goes up too — that's why a "fixed" payment can still change a little from year to year.
Closing day
At least three business days before closing you get the Closing Disclosure — final terms and costs. Use those days to compare it line by line against your Loan Estimate and question anything that grew. Then you sign, the loan funds, and the house is yours. Keep every document.