To get a home loan, you need proof of steady income, a reasonable debt load, enough savings for a down payment and closing costs, and a collection of financial documents that verify all of it. Lenders evaluate these pieces together to decide whether to approve you and what interest rate to offer. Here’s what to prepare before you apply.
Credit Score
Your credit score is one of the first things a lender checks, and the minimum threshold depends on the type of loan. For conventional loans backed by Fannie Mae, there is no longer a fixed minimum credit score requirement (Fannie Mae eliminated it in late 2025), but individual lenders still set their own floors, and most expect at least a 620. FHA loans typically require a minimum score of 580 if you want the lowest down payment option, though borrowers with scores between 500 and 579 may still qualify with a larger down payment. VA and USDA loans don’t have official government-mandated minimums, but lenders commonly look for scores of 620 or higher.
A higher score does more than just get you approved. It directly affects your interest rate, which determines how much you pay over the life of the loan. Someone with a 760 score might get a rate a full percentage point lower than someone at 660, and on a 30-year mortgage that difference can add up to tens of thousands of dollars in interest.
Income and Debt-to-Income Ratio
Lenders need to see that your monthly income comfortably covers your existing debts plus the new mortgage payment. They measure this with your debt-to-income ratio (DTI), which is your total monthly debt payments divided by your gross monthly income. If you earn $6,000 a month before taxes and your debts (car loan, student loans, credit card minimums, and the projected mortgage payment) total $2,400, your DTI is 40%.
For conventional loans underwritten through Fannie Mae’s automated system, the maximum DTI is 50%. Loans reviewed manually have a stricter cap of 36%, though that can stretch to 45% if you have strong credit scores and cash reserves. Government-backed loans like FHA, VA, and USDA follow their own agency guidelines, which generally allow DTI ratios in the 41% to 50% range depending on the borrower’s overall profile.
If your DTI is too high, you have two levers: increase your income or pay down existing debt before applying. Paying off a car loan or credit card balance can shift your ratio enough to qualify.
Down Payment
The old rule that you need 20% down hasn’t been true for years. Most conventional loans let you put down as little as 3% if you have solid credit. FHA loans require a minimum of 3.5% with a credit score of 580 or above. VA loans (for eligible military members and veterans) and USDA loans (for eligible rural and suburban buyers) offer zero-down financing.
Putting down less than 20% on a conventional loan means you’ll pay private mortgage insurance (PMI), a monthly fee that protects the lender if you default. PMI typically costs between 0.5% and 1% of the loan amount per year, and it drops off once you reach 20% equity. FHA loans carry their own version called a mortgage insurance premium (MIP), which works similarly but can last the entire life of the loan depending on your down payment size.
Down payment assistance programs exist at the state and local level, and some lenders offer their own programs that reduce or eliminate the upfront cash you need. These are worth researching if saving for a down payment is your biggest hurdle.
Cash Reserves and Closing Costs
Beyond the down payment, you need money for closing costs, which typically run 2% to 5% of the purchase price. On a $350,000 home, that’s $7,000 to $17,500 covering items like the appraisal, title insurance, origination fees, and prepaid taxes and insurance.
Some lenders also want to see cash reserves, meaning money left in your accounts after the down payment and closing costs are paid. Reserves are measured in months of mortgage payments. A lender might want two to six months of reserves depending on the loan type, property type, and your overall financial picture. These reserves don’t get spent at closing. They just prove you have a financial cushion.
Employment and Income History
Most lenders want to see at least two years of consistent employment and income. That doesn’t necessarily mean two years at the same job. Changing employers is fine as long as you stayed in the same field or moved to a higher-paying role. Gaps in employment can raise questions, but they won’t automatically disqualify you if you can show stable income now and a reasonable explanation.
Self-employed borrowers face extra scrutiny. Lenders typically average your net income over the past two years using your tax returns, so a year with low reported income can drag down your qualifying amount. If you’re self-employed and planning to buy, keep your reported income as consistent as possible in the years leading up to your application.
Documents You’ll Need to Provide
The paperwork for a mortgage application is extensive, but it all serves one purpose: proving the income, assets, and identity you’ve claimed. Gathering these documents before you apply speeds up the process considerably.
Proof of income:
- Pay stubs from the most recent two months
- W-2 forms from the last two years
- Tax returns from the last two years (required for self-employment, rental income, or commission-based income)
- 1099 forms if you do contract work
- Profit and loss statements or business tax returns if you own a business
- Social Security award letter if you receive benefits
Asset statements:
- Checking and savings account statements (typically the last two to three months)
- Retirement account statements (401(k), IRA)
- Investment and brokerage account statements
- Certificates of deposit or bond holdings
Additional documents:
- Government-issued photo ID
- Social Security card or ITIN
- Employer names and addresses for the past two years
- Residential addresses for the past two years
- Copy of your signed purchase contract
- Gift letter if a family member is contributing to your down payment
- Divorce decree, if applicable
- Bankruptcy discharge papers, if applicable
- Business license if you’re self-employed
Large deposits that appear in your bank statements will need to be explained. If a family member gave you $10,000 for the down payment, you’ll need a gift letter stating it’s not a loan. If you sold a car or received a bonus, have documentation ready. Lenders trace every significant deposit to make sure you’re not taking on hidden debt to fund the purchase.
Getting Preapproved First
Before you start house hunting, get preapproved rather than just prequalified. Prequalification is a rough estimate based on what you tell a lender. Preapproval involves actually submitting your documents and having your credit pulled, resulting in a letter stating how much the lender is willing to loan you. Sellers take preapproved offers more seriously, and the process forces you to identify any problems (a credit error, a missing document, a DTI that’s too high) before you’re under contract with a deadline.
Preapproval letters are typically valid for 60 to 90 days. You can get preapproved by multiple lenders to compare rates without significant additional damage to your credit score, as long as the inquiries happen within a short window (usually 14 to 45 days, depending on the scoring model). Shopping around for rates is one of the simplest ways to save money on a mortgage.