To get a mortgage, you need a qualifying credit score (typically 580 or higher), proof of steady income, a down payment, enough cash to cover closing costs, and a stack of financial documents that verify everything you claim on your application. The exact thresholds depend on which loan type you pursue, but the core ingredients are the same: lenders want confidence that you earn enough to make payments, that you have a track record of repaying debt, and that you have skin in the game through your own money invested in the property.
Credit Score Minimums by Loan Type
Your credit score is the first filter most lenders apply. Conventional loans require a minimum 620 credit score. FHA loans drop that floor to 580 if you put at least 3.5% down, or to 500 if you can put 10% down. VA loans, available to eligible military members and veterans, have no official minimum score set by the VA itself, though most VA-approved lenders won’t go below 620.
A higher score does more than just get you approved. It directly affects the interest rate you’re offered, which translates into tens of thousands of dollars over the life of a 30-year loan. If your score is close to a cutoff, even a small improvement of 20 to 40 points before you apply can save you real money.
Debt-to-Income Ratio
Your debt-to-income ratio, or DTI, measures how much of your gross monthly income goes toward debt payments. Lenders add up your existing obligations (car loans, student loans, credit card minimums, child support) plus your projected mortgage payment, then divide by your gross monthly income. Conventional lenders prefer a maximum DTI of 45%, though borrowers with strong credit and extra savings may qualify up to 50%. FHA loans cap DTI at 43%. VA loans set the ceiling at 41%.
If you earn $6,000 a month before taxes and your total debt payments including the new mortgage would be $2,700, your DTI is 45%. That’s right at the conventional limit and over the line for FHA and VA. Paying off a car loan or credit card balance before applying can be one of the most effective ways to improve your borrowing power.
Down Payment Requirements
The traditional 20% down payment is not required for most loan programs. Conventional loans are available with as little as 3% down for qualified buyers. FHA loans require 3.5% with a credit score of 580 or higher, or 10% with a score between 500 and 579. VA and USDA loans offer zero-down-payment options for eligible borrowers.
The tradeoff for putting down less than 20% is mortgage insurance. On conventional loans, you’ll pay private mortgage insurance (PMI), which typically runs $30 to $70 per month for every $100,000 borrowed. On FHA loans, you pay an upfront mortgage insurance premium of 1.75% of your loan amount at closing, plus an annual premium of 0.15% to 0.75% that’s spread across your monthly payments. PMI on conventional loans can be removed once you reach 20% equity, but FHA mortgage insurance often stays for the life of the loan.
On a $300,000 home with 5% down, you’d bring $15,000 for the down payment and your PMI might add $85 to $200 to your monthly payment until you build enough equity to drop it.
Closing Costs
Beyond the down payment, you need cash for closing costs, which typically run 3% to 6% of your loan amount. On a $285,000 loan, that’s $8,550 to $17,100. These fees cover the services required to originate, verify, and finalize the mortgage.
The major line items include:
- Loan origination fee: about 1% of the loan amount, paid to the lender for processing your mortgage
- Appraisal fee: $300 to $600 for a professional assessment of the home’s market value
- Title search and title insurance: the search runs $75 to $200, and lender’s title insurance costs 0.5% to 1% of the mortgage
- Escrow deposits: advance payments for property taxes and homeowners insurance, sometimes covering several months upfront
- Recording fee: around $125, paid to the local government to record the property transfer
- Prepaid interest: daily interest charges that accrue between your closing date and the first mortgage payment
You may also see smaller charges for credit reports ($10 to $100), flood certifications ($15 to $25), and pest inspections (around $100). Some lenders charge an application fee of up to $500. Not every fee appears on every loan, and some are negotiable. You’ll receive a Loan Estimate document within three business days of applying that breaks down your expected costs, so you can compare offers from different lenders side by side.
Documents You’ll Need
Mortgage applications require thorough documentation. Gathering these before you apply speeds up the process significantly.
For income verification, expect to provide:
- Pay stubs from the most recent two months
- W-2 forms for the last two years
- Tax returns for the last two years (required for self-employment income, rental income, and commission income)
- 1099 forms if you work as a contractor
- A Social Security award letter if you receive benefits
For assets, you’ll need recent statements from every account you plan to use for your down payment or reserves: checking, savings, certificates of deposit, retirement accounts, investment accounts, and any business accounts. Lenders review these to confirm you have the cash you claim and to trace where it came from. If part of your down payment is a gift from a family member, you’ll need a gift letter stating the money doesn’t need to be repaid.
You’ll also need a government-issued photo ID, your Social Security card or ITIN, employer names and addresses for the past two years, and residential addresses for the past two years. If you’re currently renting, some lenders ask for proof of rent payments or a copy of your lease. Divorce papers, bankruptcy documents, and a business license for self-employed applicants may be required depending on your situation.
Income and Employment History
Lenders generally want to see two years of stable income. For salaried employees, this is straightforward: W-2s and pay stubs tell the story. Gaps in employment or recent job changes don’t automatically disqualify you, but expect the lender to ask for written explanations.
Self-employed borrowers face a higher documentation burden. Fannie Mae guidelines require two years of prior earnings history, verified through signed personal and business federal tax returns with all schedules attached. Alternatively, lenders can use IRS-issued transcripts of those returns. If you’ve been self-employed for less than two years, you may still qualify if your most recent tax return reflects a full 12 months of income from the business. And if the business has existed for at least five years with you holding 25% or more ownership throughout, some lenders will accept just one year of tax returns.
The key challenge for self-employed borrowers is that lenders use your net income after deductions, not gross revenue. If you’ve been aggressive with business write-offs, your qualifying income may be lower than what you actually earn. Planning a year or two ahead and adjusting your deduction strategy can make a meaningful difference in how much you qualify to borrow.
What the Process Looks Like
Before you start shopping for homes, get pre-approved. A pre-approval involves submitting your documents and having the lender pull your credit, resulting in a letter that states how much you’re conditionally approved to borrow. Sellers take offers more seriously when they come with a pre-approval letter, and the process gives you a realistic budget before you start touring properties.
Once you have an accepted offer on a home, the lender orders an appraisal to confirm the property is worth the purchase price. An underwriter reviews all your documentation in detail, and may come back with requests for additional paperwork or explanations. This phase typically takes 30 to 45 days. During this time, avoid making major financial changes: don’t open new credit accounts, don’t make large purchases on credit, and don’t switch jobs if you can help it. Any of these can trigger a re-evaluation that delays or derails your closing.
At closing, you’ll sign the final loan documents, wire your down payment and closing costs, and receive the keys. Your first mortgage payment is usually due the first of the month following a full month after closing. If you close on March 15, for example, your first payment would typically be due May 1, with the interest from March 15 through March 31 covered by the prepaid interest you paid at closing.