What happens when you apply for a mortgage at your bank
When you apply for a mortgage at your bank, you start a process that typically takes 30 to 45 days from application to closing. Your bank will ask for financial documents, order an appraisal of the property, verify your income and credit, and underwrite the loan — meaning they assess the risk of lending to you. At the end, if approved, you sign closing documents and the bank funds the loan.
Most banks handle mortgages through a loan officer or mortgage department. You can start the conversation in person at a branch, over the phone, or online through the bank's website. The bank will give you a Loan Estimate within three business days of your application; this document shows the interest rate, monthly payment, closing costs, and other terms. You are not locked into that rate unless you pay a fee to lock it.
Key Takeaways
- You will need to provide pay stubs, tax returns, bank statements, and proof of employment before the bank can move forward with underwriting.
- The bank orders an appraisal to confirm the property is worth what you are paying; if it appraises low, you may need to renegotiate or put down more cash.
- Your credit score, debt-to-income ratio, and down payment size all affect whether you are approved and what interest rate you receive.
- The Loan Estimate shows your rate, payment, and closing costs; rates can change if you do not lock them, and locking costs money but protects you from rate increases.
- Closing happens 1 to 2 weeks after underwriting approval, when you sign final documents and the bank transfers the money to the seller.
Documents you need to gather before applying
Bring or upload the following to your bank's loan officer: two months of recent pay stubs, two years of tax returns (personal and business if self-employed), two months of bank statements showing your down payment savings, a government-issued ID, and proof of employment (a letter from your employer stating your job title, salary, and hire date). If you are self-employed, bring profit-and-loss statements or business tax returns instead of W-2s.
If you have changed jobs in the past two years, bring an offer letter from your new employer or a letter from your current employer confirming the job is permanent. If you have had late payments, collections, or bankruptcy, the bank will ask about them; be honest and bring documentation showing you resolved the issue. If you are using a gift for your down payment, the person giving the money must provide a letter stating it is a gift, not a loan, and you may need to show the gift moving into your account.
Keep copies of everything you submit. The bank may ask for updated documents (like a new pay stub) as time passes between application and closing, so having duplicates saves time.
How the bank checks your credit and income
Your bank will pull your credit report from one or more of the three major credit bureaus — Equifax, Experian, and TransUnion. The report shows your payment history, outstanding debts, credit inquiries, and any collections or judgments. Most banks require a credit score of at least 620 to 640 for a conventional mortgage, though scores above 740 usually get better interest rates. If your score is lower, ask whether the bank offers FHA loans, which allow scores as low as 500 with a larger down payment.
The bank verifies your income by calling your employer directly or by reviewing your tax returns and pay stubs. If you are self-employed, they will examine your business tax returns for the past two years to confirm your income is stable. They also calculate your debt-to-income ratio — the percentage of your gross monthly income that goes to debt payments. Most banks want this ratio below 43 percent, meaning if you earn $5,000 a month, your total monthly debt payments (including the new mortgage) should not exceed $2,150.
The appraisal and underwriting process
After you apply, the bank orders an appraisal from a licensed appraiser who inspects the property and compares it to similar homes that sold recently in the area. The appraisal costs $400 to $600 and is usually paid by you upfront or rolled into closing costs. The appraiser's job is to confirm the property is worth at least what you are paying for it.
If the appraisal comes in lower than your offer price, you have three options: renegotiate the price with the seller, put down more cash to make up the difference, or walk away (though you may lose your earnest money deposit depending on your contract). If the appraisal is higher, you are in a strong position but your payment does not change — the loan is based on the purchase price, not the appraised value.
Underwriting happens after the appraisal is ordered. An underwriter — a person at the bank who reviews your file — checks that all documents are complete, that your income and credit support the loan amount, and that the property itself is acceptable collateral. Underwriting typically takes 5 to 10 business days. The underwriter may ask follow-up questions or request additional documents; respond quickly because delays here push back your closing date.
Interest rates, locking, and your monthly payment
Your interest rate depends on the type of loan, the current market, your credit score, your down payment size, and the loan term (15 years, 30 years, etc.). Rates change daily. When you receive your Loan Estimate, the rate shown is usually good for 10 days; after that, it may go up or down depending on market movement.
You can lock your rate — pay a fee (usually 0.25 to 0.5 percent of the loan amount) to may provide that rate will not change for a set period, typically 30 to 60 days. Locking protects you if rates rise but costs money upfront. If rates fall after you lock, you cannot take advantage of the drop unless you pay to unlock and re-lock at the new rate. Ask your loan officer what the lock fee is and whether it can be rolled into your closing costs.
Your monthly payment is calculated using the loan amount, interest rate, and term. A $300,000 loan at 6.5 percent over 30 years costs roughly $1,896 per month in principal and interest alone; property taxes, homeowners insurance, and mortgage insurance (if your down payment is less than 20 percent) are added on top. Use your bank's mortgage calculator or ask your loan officer for an exact payment estimate once your rate is locked.
Closing: the final step
Closing typically happens 1 to 2 weeks after the underwriter approves your loan. You will receive a Closing Disclosure document at least three business days before closing; this is the final version of your loan terms, payment, and closing costs. Review it carefully and compare it to your original Loan Estimate. If anything has changed significantly, ask your loan officer why.
At closing, you sign documents including the promissory note (your promise to repay the loan), the mortgage or deed of trust (the bank's claim on the property if you do not pay), and the Closing Disclosure. You also pay your down payment and closing costs in full — usually by wire transfer or cashier's check. The bank will tell you the exact amount due and where to send it at least one day before closing.
After you sign, the bank funds the loan (sends the money to the seller's attorney or title company), and the title is transferred to you. You receive the keys and become the owner. The bank sends you a payment coupon or sets up automatic payments; your first mortgage payment is usually due 30 days after closing.
What to do if the bank denies your application
If the bank denies your mortgage, they must tell you why in writing within a reasonable time. Common reasons include a credit score that is too low, a debt-to-income ratio above the bank's limit, insufficient down payment savings, or a property that does not meet the bank's standards (for example, a condo building with too many units or too many investor-owned units).
If denial is due to credit or income, you can ask whether the bank offers alternative loan products — FHA loans, VA loans (if you are military), or portfolio loans (loans the bank keeps rather than sells) often have looser requirements. You can also wait and reapply after improving your credit score or paying down debt. If the property itself is the issue, you cannot fix that with this lender, but a different bank may have different property standards.
Before reapplying elsewhere, ask the first bank for a detailed explanation so you know what to address. Do not apply to multiple banks in a short period; each application triggers a hard credit inquiry, and too many inquiries in a short time can lower your score further.
Frequently Asked Questions
Can I lock my rate before I find a house?
Most banks will not lock a rate without a property under contract because they need the appraisal and property details to finalize terms. Some banks offer a "rate hold" or "rate may provide" for 30 to 60 days while you shop, but this is not the same as a lock and may not be free. Ask your loan officer what options are available.
What happens if my income changes between application and closing?
Tell your loan officer immediately. A job loss or significant income drop can trigger a re-underwriting and may result in denial. A job change to similar or higher pay usually does not cause problems if you have an offer letter. The bank may ask for a new pay stub or employment verification letter.
Do I have to use my bank's appraisal, or can I get my own?
The bank orders and pays for the appraisal, and you cannot substitute your own. The appraisal must be ordered through the bank's process to ensure the appraiser is independent and meets the bank's standards. You can request a copy of the appraisal after it is complete.
What if I want to change my loan terms after I apply?
You can change the loan term (for example, from 30 years to 15 years), the down payment amount, or the interest rate lock at any time before closing, but changes may affect your rate, payment, or closing costs. Contact your loan officer as soon as you know you want to change something; delays can push back your closing date.
Can I back out of the mortgage after I am approved?
Yes, but the consequences depend on your purchase contract and how far along you are. If you are still in the inspection or appraisal period, you may be able to walk away without penalty. Once you are past those contingencies, backing out may cost you your earnest money deposit. Review your purchase contract and ask your real estate agent or attorney before you decide.