The mortgage approval process follows several steps.

The first step in the process is to submit a mortgage application for pre-approval. You don't have to become pre-approved, but it's recommended since it can speed up the process. This pre-approval process simply means that the mortgage application, verification of references and credit occur before location of the exact property. Pre-qualification can be a huge negotiating tool when making offers on properties. A seller is more likely to adjust the price a bit when they KNOW the buyer already has mortgage approval. Whatever the method of obtaining a mortgage you choose, there will be an application which will have to be approved. Your credit references and history will be checked and verified. Unless you already have a long history of mortgages or other loans with your bank or have a lot of money invested in their institution, all your facts will be reviewed, verified, and looked at with a critical eye to assess the risk of financing. If you have a good credit background you'll have a better chance of being approved. Once you are pre-approved, you'll know how much you can afford to pay.

The second step, once you locate the desired property, is to make an offer. This may be as simple as saying “yes, I want this property”. However, if the price is not just right, you may go through negotiations until an actual amount is agreed upon.

Next, the property will have to be appraised. The evaluator provides this information in a formal letter to the prospective lender.

The mortgage amount, which is often not more than 80% of the property value, is then defined by the mortgage lender. Down payment terms are established.

If you are happy with the mortgage offered for your approval, simply sign the papers and await closing on the property. This closing process usually takes from a week to several weeks, depending on both buyer and seller. There are a few other details including a home inspection, but we have touched mainly upon how the mortgage approval process works.