Is it better to get a 30-year or 15-year mortgage when buying a home?

A 30-year mortgage offers lower monthly payments and more budget flexibility, but results in significantly more total interest paid over the life of the loan. A 15-year mortgage has higher monthly payments but a lower interest rate and far less total interest. The right choice depends on your monthly budget, how long you plan to stay in the home, and whether you prioritize payment flexibility or minimizing total cost.

Home » Applying for a Mortgage

Written by

Brian McKay

| Fact checked | Published April 9, 2023 | Updated September 28, 2026 | 6 min read

How to Apply for a Mortgage: A Step-by-Step Guide

Q: What are the steps to apply for a mortgage?

The main steps are: determine how much you can afford, check and improve your credit score, gather financial documents, compare rates from multiple lenders, get pre-approved, find a home, and submit a full mortgage application. After application comes underwriting, appraisal, and finally closing. Pre-approval strengthens your offer and gives you a clear picture of what you can borrow.

Q: How do I know how much mortgage I can afford?

A general guideline is that your total monthly housing costs (mortgage payment, property taxes, and insurance) should not exceed 28% of your gross monthly income, and your total debt-to-income ratio should stay below 43%. Use an online mortgage calculator to estimate monthly payments at different purchase prices and interest rates, and factor in property taxes, insurance, HOA fees, and maintenance costs.

Applying for a mortgage takes six main steps: check your credit, set a budget, gather pay stubs, W-2s, tax returns and bank statements, get preapproved, compare Loan Estimates from at least three lenders, then lock your rate and complete underwriting and closing, which typically takes 30 to 45 days. The MonitorBankRates national average is 7.18% on a 30 year fixed mortgage and 6.73% on a 15 year fixed, verified by MonitorBankRates as of October 13, 2026.

30 year fixed

7.18%

avg rate

15 year fixed

6.73%

avg rate

MonitorBankRates national averages as of October 13, 2026, computed from rates published by more than 8,000 banks and credit unions.

Key facts

DTI Limit: Generally below 43%
Best Credit Score: 740+ for top rates
Documents Needed: 2 years tax returns & W-2s
PMI Avoided At: 20% down payment

Applying for a mortgage is one of the most document-intensive financial processes most people will go through. Done correctly, it results in a loan that fits your budget and positions you to close on the home you want. Done without preparation, it can lead to delays, worse terms, or a denied application. The steps below walk you through everything you need to do before submitting an application, and what to expect after.

Step 1: Determine How Much You Can Afford

Before looking at homes or contacting lenders, get an honest picture of what you can comfortably borrow. Two guidelines lenders commonly use:

Front-end ratio: Total monthly housing costs (mortgage payment, property taxes, insurance) should generally not exceed 28% of gross monthly income
Back-end ratio (DTI): Total monthly debt obligations (housing plus car payments, student loans, credit cards) should stay below 43% (though some loan programs allow higher)

Use a mortgage calculator to estimate monthly payments at different purchase prices, down payments, and interest rates. Then add property taxes, homeowners insurance, HOA fees, and a maintenance budget to get the full picture of monthly ownership costs.

Step 2: Decide if It Is the Right Time to Buy

Timing matters beyond just the mortgage rate environment. Consider:

Job stability: Lenders want to see at least two years of employment history in the same field. If a job change is imminent, it may affect your qualification.
Planned moves: If you might relocate within two to three years, the transaction costs of buying and selling may exceed the financial benefit of ownership.
Emergency fund: After a down payment, you should still have three to six months of expenses in liquid savings. Depleting your reserves entirely to buy a home creates financial vulnerability.

Step 3: Gather Your Application Documents

Assembling your documents before you apply dramatically speeds up the process and reduces back-and-forth with your lender. Standard documents include:

W-2s and federal tax returns for the last two years
Pay stubs from the last 30 days
Bank, investment, and retirement account statements from the last two to three months
Photo ID (driver's license or passport)
Proof of any additional income (rental income, alimony, disability benefits)

Self-employed borrowers need two years of business tax returns, a year-to-date profit and loss statement, and sometimes a letter from a CPA confirming the business is active.

Step 4: Check and Strengthen Your Credit

Your credit score is one of the most significant factors in determining both whether you qualify for a mortgage and what rate you receive. Before applying:

Pull your credit reports from all three bureaus at AnnualCreditReport.com and dispute any errors
Pay down revolving balances, keeping credit card utilization below 30% (ideally below 10%) boosts scores
Avoid opening new credit accounts or making large purchases on credit in the months before applying
Do not close old accounts, length of credit history matters

Credit Score Impact on Rate: The difference between a 680 and a 760 credit score can mean 0.5% or more in mortgage rate. On a $400,000 loan, that is over $40,000 in additional interest over 30 years. If your score is below 740, spending a few months improving it before applying is almost always worth the effort.

Step 5: Budget for All Homeownership Costs

First-time buyers are often surprised by costs beyond the mortgage payment. Build all of these into your budget before committing:

Property taxes: Typically 1% to 2% of home value annually, rolled into your monthly payment through escrow
Homeowners insurance: Required by lenders; varies by location, home value, and coverage level
HOA fees: Can range from $100 to over $1,000 per month in planned communities or condos
PMI: Required if your down payment is less than 20% on a conventional loan; typically $50 to $200+ per month
Maintenance and repairs: Budget 1% to 2% of home value per year for ongoing upkeep

Step 6: Determine Your Down Payment

Your down payment affects your rate, your monthly payment, and whether you need PMI. Common down payment amounts:

20%: Avoids PMI on conventional loans; typically qualifies you for better rates
10%: Requires PMI on conventional loans; reduces upfront cash needed
3.5%: Minimum for FHA loans (credit score 580+)
0%: Available on VA and USDA loans for eligible borrowers

Step 7: Shop and Compare Mortgage Rates

Do not accept the first rate you receive. Compare mortgage rates from at least three lenders: your bank, a credit union, and an online lender at minimum. Request the same loan type, term, and amount from each so you are comparing equivalent offers. Focus on APR (which includes fees), not just the stated rate.

Step 8: Choose Between a 30-Year and 15-Year Mortgage

The most common choice is between a 30-year and 15-year mortgage. A 30-year mortgage has a lower monthly payment but higher total interest; a 15-year mortgage has a higher payment but lower rate and dramatically less total interest paid. Run the numbers for your specific situation to see which serves your financial goals.

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Frequently Asked Questions

What are the steps to apply for a mortgage? ▼

The main steps are: determine your budget, check and improve your credit, gather documents, compare rates from multiple lenders, get pre-approved, find a home, and submit a full mortgage application. After submission comes underwriting, an appraisal, and finally closing. Pre-approval strengthens your offer to sellers and confirms what you can actually borrow.

How do I know how much mortgage I can afford? ▼

A common guideline is that total monthly housing costs should not exceed 28% of gross monthly income, and total debt (including the mortgage) should stay below 43% of gross income. Use a mortgage calculator to estimate payments at different purchase prices, then add taxes, insurance, HOA fees, and maintenance to get the full monthly cost of ownership.

What documents do I need to apply for a mortgage? ▼

Standard documents include W-2s and tax returns for the last two years, recent pay stubs, bank and investment statements from the last two to three months, and photo ID. Self-employed borrowers typically need two years of business tax returns and a current profit and loss statement. Having everything ready before you apply speeds up the process significantly.

How does my credit score affect my mortgage rate? ▼

Your credit score is one of the biggest factors in your mortgage rate. Scores above 740 typically receive the best rates available. Each tier below that generally means a higher rate. A half-point difference in rate on a $400,000 loan adds up to tens of thousands of dollars over 30 years, making credit improvement before applying almost always worthwhile.

Should I get a 30-year or 15-year mortgage? ▼

A 30-year mortgage has lower monthly payments and more budget flexibility but significantly higher total interest paid over the life of the loan. A 15-year mortgage has a higher monthly payment but a lower rate and far less total interest. The best choice depends on your monthly cash flow, how long you plan to stay in the home, and whether minimizing total cost or preserving monthly flexibility is the higher priority.

This article is for general information and is not financial advice. Rates shown are market averages, not offers; terms and fees are set by each institution.