Compare current mortgage rates

A mortgage loan covers the funds borrowed from a mortgage lender to finance the purchase of a home. Conventional loans, FHA loans, and VA loans are different types of mortgage loans available.

Step 1: Get pre-approved for a home loan

A mortgage pre-approval letter shows sellers and their real estate agents you’re serious about buying and gives them peace of mind because they know you’re pre-approved to get a loan. As a buyer, you'll also know exactly how much you can afford so you can tailor your home search to your ideal price range.

Step 2: Apply for a mortgage

Once you’ve found a home and the seller has accepted your offer, the mortgage loan process truly begins. It's time to apply for your home loan. Following your pre-approval, you'll work with your lender to determine the best loan type for you and your financial situation.

Step 3: Review your loan estimate

By law, your lender is required to provide you with a loan estimate which outlines your estimated interest rate, monthly payment, and other associated costs of your mortgage within three business days of receiving your completed mortgage application. Be sure to review it carefully to ensure it's entirely accurate and contains no errors before your application moves forward.

Step 4: Your application is sent to a mortgage loan processor

After you've reviewed your mortgage loan estimate, your lender will send your application to their mortgage loan processor to prepare all of your documents before sending them to the underwriter. Your loan processor will likely get in touch with you to gather additional information. The faster you submit your information, the faster your file will move to the next step.

During this step, you can also expect to complete a few additional milestones, including your appraisal, inspection, and title search.

Step 5: Your application is sent to a mortgage underwriter

The underwriter's job is to verify your mortgage application one more time with the documentation provided. The underwriter is also responsible for ensuring you meet the borrower guidelines for your application's specific loan program.

Once the underwriter has completed all necessary cross-checks and verifications, you’ll receive a conditional approval. The conditional approval means that your home closing can move forward as long as the listed conditions are met. Once everything is checked off the list, you’ll be clear to close and fully approved to purchase the home.

Step 6: Review your closing disclosure

Three days before closing, your lender must provide you with a closing disclosure. Carefully review this disclosure to compare your final terms and costs to the terms offered in your loan estimate. The closing disclosure will state your exact monthly mortgage payment and your closing costs. If you have any questions or concerns, ask your lender before heading to the closing table.

Step 7: Close on your home purchase

Congratulations! It’s time to seal the deal—you’re finally closing on your home. Before your closing date, you should receive a list from your loan officer or agent with everything you’ll need to bring on closing day.

Step 8: After closing on your mortgage

Your loan may be sold to another service provider: many lenders don’t service their loans which means they won’t be the ones collecting your monthly mortgage payment. Instead, they turn your loan over to a third-party provider. Don’t worry if this happens—it’s a common practice in the banking industry and the provider won’t change any of the terms of your mortgage loan.

For more information on these steps and what to expect, check out this article.

While specific loan requirements vary from lender to lender, here’s a rough overview to help get you started:

• Conventional loan: 620
• Jumbo loan: 660-700
• VA loan: 580-620
• FHA loan: 580
• USDA loan: 640

1. Shop around

The most important thing you can do to make sure your lender is a good fit for you is to compare multiple lenders. Different lenders offer different types of home loans. If you go with the first lender that comes along or offers the lowest interest rate, you may miss out on a great loan option. Some lenders may not even mention a certain loan that would save you money or better meet your needs if it's one they don't offer.

Mortgage shopping can also show you what a lender's customer service is like. The loan officers you talk to should be helpful, answer your questions, and never pressure you. Their ability to communicate clearly and quickly can make the difference when you're trying to close on a home.

To find lenders, start with resources you already have:

• Talk to the bank or credit union where you have your checking or savings accounts.
• Ask any friends or family members who recently purchased homes if they would recommend their lender.
• Do research online and look for lenders with good reviews.

2. Talk with your agent

If you're already working with a real estate agent, they'll likely have lender recommendations. Some lenders have a reputation for closing on time—or not. In areas where homes get lots of offers and sell fast, your lender's reputation can affect whether your offer is accepted. If you have a lender picked out, talk to your agent and weigh the pros and cons.

3. Get pre-approved early

Buyers often wait to get a loan pre-approval until later in the home buying process. But the sooner you get pre-approved, the better. Here’s why:

• You won't know what you can really afford until you've been pre-approved.
• Pre-approval is the only way to find out what kind of loan a lender will offer you.
• By checking your credit and finances, a lender can tell you if raising your credit score or reducing your debt could improve your loan options.
• Several pre-approvals from different lenders will give you the best picture of your situation. If you're worried about the effect on your credit score, don't be. Lenders and credit companies understand how all this works, so you won't be penalized for multiple mortgage-related credit checks in a short period. Learn more about mortgage pre-approvals here.
  

Pre-approval also gives you a big advantage when you're house-hunting. In a competitive market, you may need to make an offer fast, and if you don't have a pre-approval letter, you may lose out to another buyer who does. Sellers want the peace of mind of accepting an offer from a buyer who can prove they are qualified.

4. Look into first-time buyer programs

There are thousands of state and local homebuyer programs that can help first-time buyers afford a home. Often they partner with lenders that are certified to offer the program and have experience working with first-time homebuyers. Local nonprofits that help lower-income buyers frequently have lenders in their network also. Find first-time homebuyer programs in your area.

No matter what lender you're talking to, you can ask if they offer programs for first-time homebuyers. Just make sure to inquire about all the pros and cons, because some of these loans may have hidden costs.

5. Ask about fees and timelines

Your home may be the biggest purchase of your life, so don't be afraid to ask questions. For example, does the lender charge fees to complete your loan? Ask how much these will add to your closing costs, or consider a lender that doesn't charge fees.

Other important details are timing and responsiveness. If you're buying in a hot market, you may want a lender who can complete your loan in less than 30 days. A lender should also be easy to get a hold of quickly so that you and your agent can resolve problems and get the deal done on time.

Here's a list of questions to ask when choosing a mortgage lender:

• How much are your lender fees?
• What programs do you offer for first-time homebuyers?
• How soon can you close?
• Is your entire team local?
• How many days a week do you work?

If you're house-hunting in a competitive market, a local team that works seven days a week is often your best bet. Delays can happen when members of the mortgage team are on opposite coasts or they're closed for the weekend. For more insight on this, talk to your real estate agent.

Your lender can walk you through each product in more detail and recommend the best option for you. While specific loan requirements vary from lender to lender, here’s a rough overview to help get you started:

Conventional loans

A conventional mortgage or loan is any type of home loan that’s not offered or secured by a government entity. The loan is instead funded by private lenders like our full-service mortgage provider, Bay Equity, or other banks/mortgage companies.

Best loan product for borrowers who have stable employment, a strong credit history, minimal debt, and enough available funds to make a down payment of at least 3%-5%.

Jumbo loans

A jumbo loan exceeds the loan limits set by Fannie Mae and Freddie Mac, which are government-sponsored organizations that buy loans from banks. Also known as non-conforming conventional mortgages, jumbo loans are riskier for lenders because they aren’t guaranteed by Fannie and Freddie, meaning the lender is not protected from losses if a borrower can’t pay off their mortgage. Jumbo loan limits can vary depending on your location, so be sure to check the limit in your local market.

Best loan product for borrowers with excellent credit, sufficient savings, and minimal debt who are looking for a property outside the conventional loan limits or a luxury property.

VA loans

The U.S. Department of Veteran Affairs issues VA loans to active or retired members of the U.S. Military, as well as eligible spouses.

Best loan product for military veterans who've served 90 days consecutively during wartime, 180 days during peacetime, or six years in the reserves. These loans are also available to eligible military spouses.

FHA loans

FHA loans are part of a group of loans that are backed by the federal government. This means that instead of actually lending money, the FHA offers a guarantee to banks and private lenders that they’ll cover any losses in the event that a borrower doesn’t repay their loan in full.

Because of this reduced risk, lenders can offer loans with lower down payments to borrowers who may have less than perfect credit or limited income.

Best loan product for first-time homebuyers with smaller down payments or lower credit scores. However, these loans are not reserved for first-time homebuyers. Homebuyers purchasing their second or third house can qualify as long as they stay within the price limit.

USDA loans

Backed by the U.S. Department of Agriculture, these loans are designed for families who want to buy a home in a rural area.

Best loan product for low-income borrowers who want to live or live in rural areas.

For more details, including the pros and cons of each mortgage type, check out this article.

Mortgage points, or discount points, are optional fees you can pay at closing to buy a lower interest rate. This is also referred to as “buying down the rate”, and can help you save on the overall cost of the mortgage loan. The cost to buy a mortgage point is equal to 1% of your total loan. However, how much each point lowers the rate varies by lender. For example, if your loan is for $200,000, one point will cost you $2,000. In effect, your purchase of a mortgage point means you’re prepaying some interest to create a smaller monthly mortgage payment. The power a mortgage point has to lower your interest rate depends on your specific mortgage loan and the overall interest rate environment.

Be wary of lenders that automatically put points on their upfront fee sheets and loan estimates. Always get a no-point option to compare to.

If the following situations apply to you, buying discount points may be worth it:

• You plan to live in your home for a while. The longer you stay in your home, the more it makes sense to invest in points and a lower mortgage rate. If you stay in this home for 10, 15, 20 years or longer, paying more upfront and enjoying the long-term savings will make sense.
• You've determined when the breakeven point is. A lower interest rate will save you in the long run, but it all depends on the math and your breakeven point. Buying points may eliminate the need— and associated costs— to refinance in the future as you've purchased a lower rate upfront.

While buying discount points can help you save money long-term, it is not the best plan for every homebuyer. Buying mortgage discount points is not the right strategy if:

• You don’t plan to stay in your home for long. Points are a long-term strategy to pay less interest over time. It takes a few years for the money you save on interest to override the amount you spend to buy the points. So if you know you’ll want to sell your home in the near future, points aren’t worth the cost.
• Your down payment would take a hit. It ’s usually recommended to put extra funds (if you have them) towards your down payment rather than discount points. A larger down payment could mean lower payments, a lower interest rate, or cheaper home mortgage insurance (or none at all).
• You plan to pay your mortgage off early. Mortgage points only make sense if you plan to pay on your home loan for a long time. If you have the means to pay off your loan quickly, the savings discount points can provide may not be worth it.
• You don’t have the money to buy points. Financial experts recommend not draining your savings to save on interest down the line. Rather, you could save on interest in the long run by paying extra toward your principal when you have the money.

When you shop for a mortgage, the lender will prepare a mortgage loan offer, which will detail the proposed loan rate, loan duration, and monthly payment amount if the loan is approved. When you receive this offer, the lender will ask if you want to lock in your interest rate. If you choose to lock in your rate, it will be guaranteed—or locked in—for a specific time frame, usually through your anticipated closing date.

Lenders offer rate locks to borrowers because interest rates often fluctuate between when you first submit your loan application and finally close on your home, often many weeks later. If you lock the rate and market interest rates increase, you still get to keep your lower rate. But you could lose out if you lock a rate and interest rates fall—unless your lender offers a float-down option.

When rates are on the rise: Start by researching the current trends for mortgage rates. If they've been increasing, it could be wise to lock in now. Be sure to ask your loan officer for guidance.

When the Federal Reserve is set to meet: The Federal Reserve board meets quarterly to assess the economy and consider the need to adjust the federal funds rate. Market interest rates tend to increase after the Fed meets, especially if they discuss a rate increase.

When your budget is tight: Locking in your interest rate will allow you to set your budget and give you a clearer sense of your monthly mortgage payment.

When closing is set: If your closing date is not negotiable and you’re offered a competitive interest rate, it would be wise to lock in your rate. If your closing date is flexible or you're uncertain about how delays will affect it, locking in a rate may not be worth it since you may have to pay for an extension.

Closing costs are the fees and other expenses associated with the purchase and sale of a home. So how much are closing costs on a house, and what do they include?

• Closing costs usually total 2%–5% of the home’s purchase price.
• They're due with your down payment when you close on the home. Just like your down payment, you'll need enough available in your bank account to cover these costs on closing day.
• Typical closing costs include lender and escrow fees, insurance, and taxes—costs associated with completing the home sale and making the home legally yours.

Lender fees are negotiable, and some lenders don't charge a fee at all. When you get pre-approved, make sure to ask about these fees (also known as origination, processing, or underwriting fees) and shop around so you can compare costs.