Qualifying for a mortgage comes down to four main factors: your credit score, your income relative to your debts, your down payment, and your employment documentation. Lenders evaluate each of these to decide whether you’re a reliable borrower and how much they’re willing to lend. Here’s what you need to meet the bar for each one.
Credit Score Minimums by Loan Type
Your credit score is the first gate. Different loan programs set different floors, and the score you bring also affects your interest rate and down payment options.
- Conventional loans require a minimum 620 FICO score. These are the most common mortgages and are backed by Fannie Mae or Freddie Mac.
- FHA loans have the lowest threshold of any standard program. You can qualify with a score as low as 500 if you put 10% down, or 580 if you make the minimum 3.5% down payment.
- VA loans (for eligible veterans and active-duty service members) have no official minimum score set by the VA itself, but most VA-approved lenders require at least 620.
- USDA loans (for buyers in eligible rural and suburban areas) also lack a government-set minimum, though lenders typically require a 640 or higher.
Even if you clear the minimum, a higher score gets you better terms. Someone with a 760 might see an interest rate a full percentage point lower than someone at 640, which on a $300,000 loan can mean tens of thousands of dollars saved over the life of the mortgage. If your score is borderline, spending a few months paying down credit card balances and correcting errors on your credit report can make a meaningful difference.
How Debt-to-Income Ratio Works
Your debt-to-income ratio, or DTI, measures how much of your gross monthly income goes toward debt payments. Lenders use it to judge whether you can comfortably handle a mortgage on top of your existing obligations. To calculate yours, add up all your monthly debt payments (car loans, student loans, credit card minimums, personal loans, and your projected mortgage payment including taxes and insurance) and divide that total by your gross monthly income before taxes.
For conventional loans, Fannie Mae caps the total DTI at 36% for manually underwritten loans. That cap can stretch to 45% if you have strong credit scores and cash reserves. If your loan is run through Fannie Mae’s automated underwriting system, which most applications are, the maximum allowable DTI goes up to 50%. FHA loans generally allow up to 43%, though exceptions exist with compensating factors like a larger down payment or significant savings.
In practical terms, if your household earns $7,000 a month before taxes and your total monthly debts (including the new mortgage) would be $3,000, your DTI is about 43%. That would pass automated underwriting for a conventional loan but would need extra justification under manual review. If you’re close to the limit, paying off a car loan or credit card before applying can shift the math in your favor.
Down Payment Requirements
The 20% down payment is a well-known benchmark, but it’s not a requirement for most loan programs. Here’s what each type actually asks for:
- Conventional loans: As low as 3% for first-time buyers through programs like Fannie Mae’s HomeReady or Freddie Mac’s Home Possible. Putting down less than 20% means you’ll pay private mortgage insurance (PMI), which typically costs 0.5% to 1% of the loan amount per year, added to your monthly payment.
- FHA loans: 3.5% minimum with a credit score of 580 or above, or 10% with a score between 500 and 579. FHA loans require mortgage insurance for the life of the loan if you put down less than 10%.
- VA loans: No down payment required. This is one of the biggest advantages for eligible borrowers, and VA loans don’t charge monthly mortgage insurance.
- USDA loans: No down payment required for eligible properties and borrowers who meet income limits.
Many state and local housing agencies also offer down payment assistance programs, often in the form of forgivable loans or grants. These are available not just to first-time buyers. Some programs extend to move-up and repeat buyers with household income limits that can be surprisingly generous, sometimes above $130,000. Your state housing finance agency’s website is the best place to find what’s available in your area.
Income and Employment Documentation
Lenders need to verify that your income is stable and sufficient. What you’ll need to provide depends on how you earn your money.
W-2 Employees
If you work a salaried or hourly job, expect to provide your two most recent W-2 forms, your two most recent pay stubs (covering at least 30 days), and two years of federal tax returns. Lenders want to see consistent employment, ideally at least two years in the same field. Gaps in employment don’t automatically disqualify you, but you’ll likely need to explain them in writing.
Self-Employed Borrowers
Self-employment adds complexity. Fannie Mae generally requires a two-year history of prior earnings, verified through signed federal income tax returns (both personal and business) or IRS transcripts for the most recent two years. If your business has been operating for at least five years and you’ve held a 25% or greater ownership share that entire time, lenders may accept just one year of personal and business tax returns. In some cases, business returns can be waived entirely if your individual returns show increasing self-employment income over the past two years from the same business.
The challenge for self-employed borrowers is that tax deductions reduce your reported income. You might earn $150,000 in revenue but show $80,000 after business expenses on your tax return, and lenders will qualify you based on that lower number. If you’re planning to buy within the next year or two, be strategic about how aggressively you write off expenses.
How Much You Can Borrow
The conforming loan limit for 2026 is $832,750 for a single-family home in most of the country. This is the maximum loan amount that Fannie Mae and Freddie Mac will back. Higher-cost areas have higher limits. If you need to borrow more than the conforming limit, you’ll need a jumbo loan, which typically requires a larger down payment (often 10% to 20%), a higher credit score (usually 700 or above), and more cash reserves.
Your personal borrowing limit depends on the interplay of your income, debts, credit score, and the loan program you choose. A lender’s preapproval letter will tell you exactly where you stand. Getting preapproved before you start house hunting gives you a realistic budget and signals to sellers that you’re a serious buyer.
What Lenders Check Beyond the Basics
Credit score, DTI, down payment, and income are the pillars, but lenders also look at a few other things that can affect your approval.
Cash reserves: Some loan programs want to see that you have two to six months of mortgage payments sitting in savings after closing. This is especially true for jumbo loans and investment properties, but even conventional loans may require reserves if your DTI is on the higher end.
Employment verification: Lenders will call your employer to confirm you still work there, sometimes just days before closing. Changing jobs, switching from salaried to commission-based pay, or going from employed to self-employed during the mortgage process can delay or derail your approval.
Credit history details: Beyond your score, lenders review your credit report for red flags like recent late payments, collections, bankruptcies, or foreclosures. An FHA loan requires a two-year waiting period after a bankruptcy discharge and a three-year wait after a foreclosure. Conventional loans typically require four years after a bankruptcy and seven after a foreclosure.
Property appraisal: The home itself has to qualify too. The lender orders an appraisal to confirm the property is worth at least what you’re paying. If the appraisal comes in low, you’ll need to renegotiate the price, cover the gap with a larger down payment, or walk away.
Steps to Get Mortgage-Ready
If you’re not quite ready to apply, a few months of preparation can significantly improve your chances and your terms. Pull your credit reports from all three bureaus and dispute any errors. Pay down revolving debt to get your credit utilization below 30%, ideally below 10%. Avoid opening new credit accounts or making large purchases on credit. Save aggressively for your down payment and closing costs, which typically run 2% to 5% of the purchase price on top of the down payment.
Gather your documents early. Having two years of tax returns, recent pay stubs, bank statements from the past two to three months, and identification ready before you sit down with a lender speeds up the process considerably. Most lenders can issue a preapproval within a few days once they have everything, and the full mortgage process from application to closing typically takes 30 to 45 days.