Applying for a mortgage can feel like being invited to a high-stakes game with unclear rules. But once you understand what lenders are really looking at, the process becomes a lot less intimidating — and maybe even empowering.
As your real estate agent or loan officer (hi, that’s us), we’ve broken it all down in plain English so you know exactly what factors affect your approval.
1. Your Credit Score: First Impressions Matter
Your credit score tells a story — how you’ve managed credit in the past. The better the score, the more confident a lender will feel lending to you.
Typical score ranges:
- 620+ for most conventional loans
- 580+ for FHA loans
- 740+ if you want the best interest rates available
The higher the score, the lower your potential borrowing cost. It’s a big deal.
2. Debt-to-Income Ratio (DTI): Do the Numbers Add Up?
This ratio compares your monthly debt obligations to your gross income. Lenders want to make sure you’re not overextended.
- Under 43% is preferred for many conventional loans
- FHA and other programs may allow slightly higher ratios
If your debts are eating up half your paycheck, that’s a red flag for lenders — and your budget.
3. Your Job and Income: Is It Reliable?
A steady income stream matters. Lenders typically review:
- Pay stubs, W-2s, or 1099s
- Job history (usually two years, but not always required)
- Current employment verification
- Signed offer letters if you’re starting a new role soon
Switching from teacher to circus performer last month? That may require a bit more explanation.
4. Cash on Hand: Can You Cover the Costs?
You’ll need enough saved to pay for:
- Your down payment
- Closing costs
- Possibly a few months of mortgage payments (reserves)
Having a financial cushion tells lenders you’re prepared — and less risky.
5. The Property Itself
Lenders also evaluate the home you want to buy. They’ll check:
- That the home’s appraised value supports the purchase price
- That the property meets safety and livability standards
- That it’s a type of property they allow loans for (condos, townhomes, etc.)
Unique or fixer-upper properties may face more scrutiny.
6. Down Payment Amount
No, you don’t always need 20%. But lenders want to see you’re contributing something:
- 3–5% down is common for many loan types
- 3.5% for FHA
- 0% for VA and USDA loans (if eligible)
A higher down payment can reduce your loan size, your monthly payments, and your lender’s nerves.
Bonus: Clean, Verifiable Paperwork
Your loan approval depends heavily on documentation. That means:
- Consistent pay history
- Clear, documented assets
- No large unexplained bank deposits
A neat paper trail can speed up your approval and reduce follow-up questions.
Practical Tips to Boost Your Approval Odds
- Review your credit early — dispute any errors in advance
- Try to reduce debt before applying
- Avoid job changes until after closing
- Keep your bank statements and tax documents handy
FAQs
Q: Is there one factor lenders care about most?
A: No single item determines approval — it’s the overall financial picture.
Q: Can I qualify if I have student loans or other debts?
A: Yes, as long as your DTI is manageable. Student debt isn’t an automatic disqualifier.
Q: What if I’ve just changed jobs?
A: It depends on your field and role. If it’s a natural career progression, lenders may be fine with it.
