Getting approved for a home loan is achievable for most people with steady income, manageable debt, and a credit score in the mid-600s or above, but it does require meeting several specific thresholds at the same time. Lenders evaluate your finances across four main areas: credit history, income relative to debt, down payment, and employment stability. Falling short in even one area can lead to a denial, which is why 36% of rejected applications in 2024 were turned down for a single reason: too much debt relative to income.
Credit Score Thresholds by Loan Type
Your credit score is the first gate. The minimum for most conventional mortgages is around 620, though a higher score gets you better interest rates and more flexible terms. Government-backed loans lower the bar. FHA loans are available with scores as low as 580 if you put at least 3.5% down, and some lenders will go as low as 500 with a 10% down payment. VA and USDA loans have no official government-set minimum, but most lenders set their own floor around 580 to 620.
The difference between “minimum” and “competitive” matters here. A 620 score will technically qualify you for a conventional loan, but you’ll pay a noticeably higher interest rate than someone at 740 or above. Over a 30-year mortgage, that rate gap can cost tens of thousands of dollars in extra interest. If your score is close to a threshold, spending a few months paying down credit card balances and correcting errors on your credit report can meaningfully improve your approval odds and your rate.
How Lenders Measure Your Debt
Your debt-to-income ratio, or DTI, compares your total monthly debt payments to your gross monthly income. This includes the new mortgage payment you’re applying for, plus car loans, student loans, credit card minimums, and any other recurring obligations. Lenders use this number to judge whether you can comfortably handle the mortgage on top of everything else you already owe.
For conventional loans underwritten manually, the general ceiling is 45%. Loans run through Fannie Mae’s automated underwriting system (called Desktop Underwriter) can be approved with a DTI as high as 50%, provided the rest of your profile is strong. FHA loans also allow DTI ratios up to 50% in some cases. If your ratio sits above 36%, expect the lender to look more closely at your credit score and cash reserves to compensate for the higher debt load.
DTI is the single biggest reason mortgage applications get denied. In 2024, it accounted for 36% of all denials reported to the Consumer Financial Protection Bureau. The math can surprise people: a $400 car payment or $300 in student loan minimums can push you over the limit even if your income feels comfortable. Before you apply, add up every required monthly payment and divide by your gross monthly income. If you’re above 43%, look for debts you can pay off or down first.
Down Payment Minimums Are Lower Than You Think
The old rule that you need 20% down hasn’t been true for a long time. Conventional loans are available with as little as 3% down through programs like Fannie Mae’s HomeReady or Freddie Mac’s Home Possible, both designed for moderate-income borrowers. Standard conventional loans typically require at least 5%. FHA loans require 3.5% down with a credit score of 580 or higher. VA loans (for veterans and active military) and USDA loans (for homes in eligible rural and suburban areas) require zero down payment.
Putting down less than 20% on a conventional loan means you’ll pay private mortgage insurance, or PMI, which adds to your monthly payment until you build enough equity. FHA loans charge their own version of mortgage insurance for the life of the loan if you put down less than 10%. Still, a smaller down payment gets you into a home sooner, and the median down payment for first-time buyers recently was 10%, well below the 20% many people assume they need.
Some lenders also want to see cash reserves, meaning money left in your accounts after closing. The requirement varies by loan type and lender, but having two to six months of mortgage payments in savings strengthens your application, especially if your DTI or credit score is borderline.
Employment and Income Documentation
Lenders generally want to see a two-year employment history showing steady or rising income. That doesn’t mean you need to have stayed at the same job for two years. Changing employers is fine as long as you stayed in the same field or moved to a higher-paying role. Gaps longer than a month or two will need an explanation, such as a layoff, medical leave, or returning to school.
If you’re starting a new job, you can still qualify. Freddie Mac allows borrowers to use income from new employment as long as the position is salaried (not hourly), the start date is within 90 days of signing the loan, and you have a fully executed offer letter that isn’t contingent on anything unresolved. The employer also can’t be a family member or someone involved in the real estate transaction.
Self-employed borrowers face extra scrutiny. You’ll typically need two years of tax returns, and lenders use your net income after business deductions, not your gross revenue. If you’ve been aggressively writing off expenses, your taxable income may look too low to qualify for the loan amount you want. This is one of the trickiest areas for self-employed applicants to navigate.
What Gets Applications Denied
Beyond the DTI issues already mentioned, the second most common denial reason is collateral problems, which accounted for 17% of denials in 2024. This happens when the home appraises for less than the purchase price. If you’ve agreed to pay $350,000 but the appraiser says the home is only worth $330,000, the lender won’t finance the full amount because they’d be lending more than the property is worth. You’d need to cover the gap out of pocket, renegotiate the price with the seller, or walk away.
Other common denial triggers include insufficient credit history (not enough accounts or too short a track record), large unexplained deposits in your bank statements, recent collections or bankruptcies, and having too many recent credit inquiries. Opening new credit accounts or making large purchases on credit in the months before applying is one of the fastest ways to hurt your chances.
Where Lending Standards Stand Now
Mortgage credit availability has been loosening slightly. The Mortgage Bankers Association’s credit availability index rose to 108.3 in March 2026, its highest level since August 2022, with growth across conventional, government, jumbo, and conforming loan categories. That said, overall credit supply remains near the lower end of its historical range. Lenders are not as loose as they were in the early 2000s, but they’re more willing to approve qualified borrowers than they were during the tightest years after the 2008 crisis.
In practical terms, this means the guidelines described above are being applied fairly consistently. If you meet the credit score, DTI, down payment, and employment requirements for your loan type, your odds of approval are strong. The borrowers who get denied are almost always missing one of those specific benchmarks, not falling victim to vague or unpredictable lending standards.
How to Improve Your Chances
If you’re worried about qualifying, the most impactful steps are reducing your DTI and improving your credit score. Pay down credit card balances to below 30% of their limits, avoid opening new accounts, and make every payment on time for at least six months before applying. If you can pay off a car loan or personal loan entirely, that monthly payment disappears from your DTI calculation immediately.
Getting pre-approved before house hunting gives you a realistic picture of what you qualify for and signals to sellers that you’re a serious buyer. Pre-approval involves a full credit pull and income verification, so you’ll know about any problems before you’re under contract on a home. If the lender flags an issue during pre-approval, you have time to fix it without the pressure of a closing deadline.