Mortgage Basics: From Preapproval to Closing Day

How do mortgage basics work — from preapproval to closing day?

Buying a home involves more than finding the right property. The mortgage process shapes your budget, timing, and legal responsibilities. This guide breaks down the full sequence — preapproval, application, underwriting, and closing — and gives practical checklists, timing expectations, negotiation pointers, and post-closing tasks so you can avoid surprises.

Quick roadmap (one-sentence view)

Preapproval estimates your buying power; the loan application starts after you sign a purchase agreement; underwriting verifies financials and the property; closing finalizes the mortgage and transfers title.

Step-by-step timeline and what lenders look for

• Preapproval (1–7 days): A lender reviews your income, assets, employment, and credit to issue a preapproval letter showing an estimated loan amount. Preapproval is stronger than prequalification because the lender verifies documentation. Bring pay stubs, recent W-2s/1099s, bank statements, and ID. A preapproval gives negotiating leverage but is not a guarantee of final loan approval (Consumer Financial Protection Bureau, consumerfinance.gov).

• Loan application (after offer accepted; 1–3 days to submit documents): You complete the Uniform Residential Loan Application (Form 1003) or the lender’s equivalent. The lender orders an appraisal to confirm the property’s market value and may request additional documentation such as condo association documents or repair estimates.

• Underwriting (7–21 days typical, can be longer): The underwriter verifies income, assets, credit, employment history, and the appraisal. Key ratios include the debt-to-income (DTI) and loan-to-value (LTV). Common reasons for delays are discrepancies in employment, undisclosed debts, or appraisal issues. For self-employed borrowers, underwriting uses different documentation paths — see our piece on mortgage underwriting for self-employed borrowers.

• Conditional approval and clearing conditions (variable): The underwriter issues a conditional approval asking you to clear specific items (e.g., updated bank statements, explanations of large deposits, HOA documents). Clearing conditions promptly keeps the process moving.

• Closing (typically 30–45 days after application): Lenders provide a Closing Disclosure at least three business days before signing (TILA-RESPA rules enforced by the CFPB). Closing day involves signing loan documents, paying closing costs, and completing title transfer. Once funded, the lender records the mortgage and you receive the keys.

Documents checklist (bring these to preapproval and application)

• Photo ID (driver’s license, passport)
• Social Security number or ITIN
• Last 2 years of tax returns (if required)
• Recent pay stubs (30 days) and W-2s
• Bank and investment statements (60–90 days)
• Proof of assets for down payment and reserves
• Rental history or mortgage statements for existing property
• Bankruptcy/discharge papers if applicable
• Gift letters if part of down payment

In my practice I’ve found a prepared document binder reduces delays — lenders often ask for the same documents repeatedly; provide clearly labeled PDFs to speed reviews.

Costs and who pays what

Expect these categories of fees:

• Loan origination and underwriting fees
• Appraisal and property inspection
• Title search, title insurance, and recording fees
• Escrow or prepaid items (taxes, homeowners insurance) often collected in advance for escrow accounts — learn how escrow accounts work in our guide on mortgage escrow accounts.
• Mortgage insurance (for low down payments)

The Closing Disclosure itemizes these costs three business days before closing (CFPB). Shop for services where allowed (title, homeowner’s insurance) to lower costs when possible.

Common underwriting pain points and how to avoid them

• Large unexplained deposits: Keep a paper trail and bank statements to document source (sale of asset, gift, etc.).
• Job changes during processing: Notify the lender immediately; frequent job hopping or a recent job change can trigger a reconsideration or re-verification.
• New credit inquiries or large purchases: Don’t open new credit lines or buy cars until after closing; new debt changes DTI and can jeopardize approval.
• Appraisal gaps: If the appraisal is lower than your offer, negotiate a lower price, bring additional comps, or increase your down payment.

Negotiation and offer tactics tied to mortgage timing

• Use a preapproval letter, not prequalification, when making offers. A preapproval demonstrates verified income and assets.
• Add contingencies wisely. An appraisal contingency protects you if the home appraises for less than the purchase price; financing contingencies let you walk if you can’t secure a mortgage.
• Consider a longer closing timeline if you’re self-employed or need to clear complex documentation—this reduces pressure and the chance of last-minute underwriting surprises.

Special cases and lender programs

• Government-backed loans: FHA, VA, and USDA loans have specific eligibility rules and lower down payment options; FHA helped expand access historically (see HUD history on FHA loan programs: https://www.hud.gov). Always verify current program limits and requirements with the lender and HUD/VA offices.
• Jumbo mortgages: Loans above conforming limits require stricter underwriting and often larger down payments.
• Self-employed borrowers: Lenders will typically request tax returns, profit-and-loss statements, and sometimes bank statements for two years — see our related article on mortgage underwriting for self-employed borrowers.

Mortgage insurance and removal strategies

Private mortgage insurance (PMI) or FHA mortgage insurance increases monthly costs for lower down-payment loans. Know when and how mortgage insurance can be removed — typically when you reach 20% equity for conventional loans or per FHA rules — and read our step-by-step timeline for removal in When and How Mortgage Insurance Can Be Removed: A Timeline.

Closing day checklist (what to expect and what to bring)

• Bring a government photo ID and proof of homeowners insurance.
• Bring certified funds or confirm wire transfer instructions with the title company or closing agent; verify wiring instructions in person or by phone to avoid wire fraud.
• Review the Closing Disclosure and the mortgage note. Confirm interest rate, loan term, monthly payment, and any balloon or prepayment clauses.
• Ask for a prorated statement showing taxes or HOA dues credited to the seller if applicable.

After closing: critical first steps

• Confirm the lender has recorded the mortgage and deed at the county recorder’s office.
• Verify your first mortgage statement and escrow account setup.
• Keep closing documents (deed, settlement statement, note, mortgage) in a secure place; you may need them for tax records or future refinancing.
• Check the mortgage interest statement for tax filing and consult IRS guidance on mortgage interest deductions if applicable (https://www.irs.gov).

Typical timelines and expectations in 2025

Average purchase closings still commonly fall between 30–45 days from application to closing but can be shorter in all-cash deals or longer during market congestion. The CFPB requires the Closing Disclosure three business days before signing and enforces timing disclosures that protect borrowers (consumerfinance.gov).

Red flags that can derail closing

• Title defects or liens not cleared
• Seller refusing to make agreed repairs that were contingencies
• Unresolved HOA issues or unpaid assessments
• Borrower’s sudden change in employment or new debt

Practical tips that save time and money

• Order homeowner’s insurance early and shop multiple carriers.
• Keep bank accounts tidy during the process — avoid large transfers without documented sources.
• Use direct deposit of pay stubs and scanned PDFs for faster delivery.
• Ask your lender for a lender credit vs. fee trade-off explanation if closing costs are high.

FAQs (concise answers)

• How much will I need for closing? Typically 2–5% of purchase price in addition to down payment, but this varies widely by loan type and location.
• Can I close faster than 30 days? Sometimes, with complete documentation and a responsive seller, closings under 21 days are possible.
• Does a preapproval expire? Yes — most preapprovals are valid 60–90 days; check with your lender.

Sources and further reading

• Consumer Financial Protection Bureau — mortgage shopping, disclosures, and timelines: https://www.consumerfinance.gov
• U.S. Department of Housing and Urban Development — FHA program history and guidance: https://www.hud.gov
• Internal Revenue Service — mortgage interest and tax reporting: https://www.irs.gov

Professional disclaimer

This article is educational and based on general industry practices through 2025. It is not personalized financial, tax, or legal advice. For individualized guidance, consult a licensed mortgage professional, tax advisor, or real estate attorney.

If you’d like a downloadable closing checklist or a sample document list tailored to a conventional, FHA, or VA loan, I can produce one based on your loan type and state.