10 steps to take before applying for a mortgage

Buying a house is more than a transaction — it’s a major milestone that can shape your finances for years. Knowing a few key steps to take before applying for a mortgage might be the difference between simply getting a home loan and securing a financial future that works best for you. From improving your financial profile to exploring your mortgage options, let’s look at what you can do to prepare for a more successful journey into homeownership.

1. Consider getting preapproved

Preapproval is an optional, but generally recommended, process many homebuyers go through before applying for their mortgage or making an offer on a house. During preapproval, your lender thoroughly reviews your finances, assessing details like your credit score, income and debts to estimate a potential mortgage amount they could offer you. Preapproval often comes with a conditional commitment letter for a mortgage as well. Note that preapproval differs from pre-qualification, which provides a more generalized estimate of potential loan offers based solely on consumer-provided data.

Getting preapproved has a few potential benefits. With a firm estimate of what your lender is willing to offer, you can make more informed decisions when house hunting. With a conditional commitment in hand, any offers you make might be more competitive as this document signals the financial backing and readiness to close on a purchase.

2. Ready your down payment

Preparing a down payment is one of earliest steps towards your mortgage — and some might say the earlier the better. This is because the down payment is often the largest lump expense associated with a home loan. There are various savings strategies that could prove helpful when planning for your down payment and gathering the necessary funds.

It’s generally recommended to consider your expected down payment early on in your homebuying journey. The size of your down payment is a major factor in shaping your loan and how much you might expect to pay overall. Generally, lenders require private mortgage insurance (PMI) on loans with a down payment below 20%ec-mortgage-insurance of the total mortgage amount, thereby increasing your monthly payments and adding to your overall costs.

If putting down enough to avoid PMI is challenging, it may be worth investigating if you qualify for other loan options. Federal Housing Administration (FHA) loans for example, typically require much smaller down payments than conventional loans, while Veteran’s Affair (VA) loans may come without any down payment requirements.

3. Calculate your mortgage fees

While your down payment is a major upfront cost when securing a home loan, there are other costs to consider. Broker fees, application fees, appraisal fees, title-related fees and more all factor into your closing costs. Before getting a mortgage, it’s generally recommended to speak with a qualified home lending advisor. Doing so may help clarify both your total closing costs and the ongoing monthly fees you’ll pay as a homeowner.

4. Improve your credit

Your credit score reflects how well you’ve managed debts in the past and lenders use it to assess your likelihood to repay your mortgage in the future. Generally, higher credit scores help you qualify for better mortgage terms and lower interest rates, reducing the total amount paid over the life of your loan. If your credit score is lower than you’d like, it might be wise to review your credit report and consider strategies for improving credit before your mortgage application. You are typically entitled to one free annual credit report from the three major credit bureaus per year. Additionally, you could consider speaking with a Home Lending Advisor to see if you qualify for home loans designed for lower credit scores.

5. Time new employment strategically

While factors like your credit score and down payment are typically among the first factors lenders weigh when assessing your mortgage application, other details matter too. One of them is employment stability. While it may not reduce your chances of qualifying for the terms you want, lenders are essentially looking for consistency and security when assessing your financial profile. The same holds true for any co-signers. If you plan to look for a new job soon, it might be worth waiting until after your mortgage is approved.

6. Know your budget

We all have ideas of our dream home, whether it’s a swimming pool in the backyard or lots of space for relaxing and hosting family and friends. Before house hunting, however, it’s helpful to know what you can afford so you can focus your search realistically. How much you should spend on your mortgage varies based on income and location, but it might be worth running your numbers through a mortgage calculator to see what's in your budget.

7. Consider your options

Lenders offer a variety of mortgage options tailored to different budgets, lifestyles, timelines and financial goals. This can range from the length of your loan term, such as a 15- or 30-year mortgage, to the way it handles interest rates, such as a fixed-rate mortgage or adjustable-rate mortgage. Speaking with your lender to understand the ins and outs of your mortgage options can help you choose a mortgage that aligns with your specific circumstances.

8. Gather your paperwork

Generally, there are a few key documents needed for a mortgage application. This is the paperwork they use to assess your financial profile and help evaluate your application. Collecting your financial records before applying can help speed things up. Lenders commonly ask for recent pay stubs, tax filings, bank statements and more. You may also need some supporting documents to explain any large deposits or withdrawals made recently. Co-signers will need to provide the same records.

9. Explore specialized mortgages

There are several national and state programs that can help you save money on your mortgage. Researching what you qualify for, as well as what restrictions apply, may help you get a better deal. For example, an Energy Efficient Mortgage (EEM) might be well-suited for people looking at green homes, while FHA 203(k) loans might be worthwhile if you want a fixer-upper.

If you're buying in a rural area, a U.S. Department of Agriculture (USDA) loan may be right for you. Veterans and active duty servicemembers, or members of the Guard or Reserve, may be eligible for a VA loan, which can help save them money with low or no down payment options and no mortgage insurance requirements. Many state and local governments have first-time homebuyer programs to help encourage residents to buy within their home state.

While Chase does not currently offer EEMs, FHA 203(k) or USDA loans, a home lending advisor may be able to help highlight specialized mortgage options that might be suitable for you.

10. Prioritize financial stability

Every financial decision you make before getting a mortgage can potentially shape the loan you’re ultimately offered. For example, while it might be tempting to finance some furniture for your new home, it might be worth waiting until you’ve signed to avoid altering your financial profile. And it's not just your credit, either — lenders generally favor consistency, which extends to your bank balance and general spending behavior. So, it might be wise to prioritize stability until the paperwork is signed and the keys are in your hand.

In summary

There are a few key steps to take before getting a mortgage that may improve your application and help you save money in the long run. This often means addressing key elements of your financial profile, like your credit score, down payment, budget and choice of mortgage, as well as doing some research into the expected fees and costs of the mortgage. A qualified home lending advisor may be able to provide more specific guidance tailored to your unique financial situation.