Mortgage Basics: How Buying a Home Works
A plain-English guide to the home loan process, from pre-approval to closing day, plus the terms you'll hear along the way.
The home buying process, step by step
Most purchases take 30–45 days from accepted offer to closing.
Get pre-approved
We review your income, assets and credit and tell you exactly how much you can borrow. Do this before you start touring homes.
Find a home and make an offer
Your real estate agent writes the offer with your pre-approval letter attached. Once it's accepted, you're in escrow.
Complete your application
We lock your rate when it makes sense and collect updated documents. You'll receive a Loan Estimate within three business days.
Appraisal and processing
The lender orders an appraisal to confirm the home's value while we verify your employment and assets.
Underwriting
The underwriter reviews the full file and may ask for a few more documents. Respond quickly and this goes fast.
Clear to close and closing
You'll get a Closing Disclosure at least three business days before signing. Sign, fund, and get your keys.
What it costs to buy
Plan for three buckets of cash. Your exact numbers depend on the loan program and the home.
Down payment
From 0% (VA, USDA) to 3–3.5% (conventional, FHA) and up. Compare programs on our purchase loans page.
Closing costs
Commonly 2–5% of the price. Sellers can sometimes contribute, and some costs can be negotiated.
Reserves
Some loans require savings left over after closing, often a few months of payments.
Mortgage terms to know
| Term | What it means |
|---|---|
| APR | Annual percentage rate. Your interest rate plus certain fees, expressed as a yearly rate. Useful for comparing loan offers. |
| DTI | Debt-to-income ratio. Your monthly debt payments divided by your gross monthly income. |
| LTV | Loan-to-value. Your loan amount divided by the home's value. 20% down means an 80% LTV. |
| Escrow | A neutral third party that holds funds during the purchase. After closing, an escrow account can also collect your property taxes and insurance monthly. |
| PMI / MIP | Mortgage insurance. PMI applies to conventional loans under 20% down; MIP applies to FHA loans. |
| Points | Optional upfront fees paid to lower your interest rate. One point equals 1% of the loan amount. |
| Rate lock | A lender's guarantee of your interest rate for a set period while your loan closes. |
| Closing costs | Fees for the lender, appraisal, title, escrow and prepaid items, commonly 2–5% of the purchase price. |
More questions? Read our FAQ or see how credit scores affect your rate.
Ready for step one?
Pre-approval is free and tells you exactly what you can afford.